31 March 2026
Protecting a vulnerable person’s inheritance
By Kieran Athow, Senior Associate, Hayes + Storr.
When considering your will, it’s important to think not only about how much you leave to loved ones, but also how and when they will receive it, particularly where a beneficiary may be considered ‘vulnerable’ – for example, due to illness, disability, addiction, or financial difficulties.
Without proper planning, an inheritance intended to provide long-term security could be spent too quickly or used inappropriately.
One effective tool is the use of a trust, including but not limited to a fully discretionary trust or a Disabled Person Discretionary Trust.
Discretionary Trusts
A discretionary trust allows you to leave money or assets in the hands of trusted individuals (the trustees), who then decide how and when your chosen beneficiaries receive support. Instead of one person inheriting a lump sum outright, the trustees can manage the funds and release money gradually or as needed.
This flexibility can be invaluable where a beneficiary’s circumstances may change or where unrestricted access to funds could be harmful. Trustees could adapt distributions to meet changing needs, for example, by delaying payments, releasing funds gradually or to pay the beneficiary’s essential living costs directly, without giving that individual access to cash.
The trust’s structure can also protect the assets from any claims by the potential beneficiaries’ respective creditors or former spouses and from adversely affecting any means tested benefits they may receive.
Fully discretionary trusts are typically subject to the Relevant Property Regime, a set of rules that governs how such trusts are taxed. This can sometimes result in higher inheritance tax charges and increased income or capital gains tax.
Disabled Person Discretionary Trust
A Disabled Person Discretionary Trust operates in a similar way but is designed primarily to benefit a qualifying disabled person, by restricting the trustees’ ability to provide for anyone else during the beneficiary’s lifetime, subject to statutory exceptions.
To qualify, the trust must meet the statutory requirements under S.89 of the Inheritance Tax 1984 and, further, the primary beneficiary must be deemed incapable of managing their property/financial affairs due to a ‘mental disorder’ as defined by the Mental Health Act 1983 and/or be in receipt of certain disability-related benefits.
These trusts are not subject to the usual tax rules under the Relevant Property Regime. With the right election to HMRC, the trust’s income and gains can instead be taxed as if they belong to the disabled beneficiary, who will often benefit from lower tax rates and higher allowances.
Choosing Trustees and Letters of Wishes
The effectiveness of a trust depends heavily on the trustees appointed, who must be chosen with care. Many clients choose a mix of family members and a professional trustee to balance personal insight with technical expertise.
Alongside the trust deed itself, a detailed ‘Letter of Wishes’ is strongly recommended. Whilst not legally binding, it acts as a vital guide for your trustees in setting out how you would like the trust to be managed in practice.
For expert advice about making provision for vulnerable beneficiaries, contact Kieran Athow in our Private Client Team on 01328 863231 or email kieran.athow@hayes-storr.com
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
