Vulnerable Persons Trust

Planning for vulnerable beneficiaries involves creating a framework to protect and provide for individuals who may have special needs or require additional support due to physical, mental or financial vulnerabilities, or other factors that make them vulnerable to exploitation or unable to manage their own affairs. This may include setting up a Vulnerable Persons Trust (VPT).

What is a Vulnerable Persons Trust?

A Vulnerable Persons Trust is a legal structure designed to hold and manage assets on behalf of a vulnerable beneficiary. It provides a way to ensure the beneficiary’s needs are met while protecting their eligibility for government benefits and safeguarding their assets. Not everyone will be eligible for a VPT and it very much comes down to the benefits an individual qualifies for.

How do I set up a Vulnerable Persons Trust?

There are several important steps involved with setting up a VPT, and Price Slater Gawne has an experienced team to guide you through the process and ensure the trust is established correctly.

1. Determine the purpose of the trust: The first step is to identify the specific needs and requirements of the vulnerable beneficiary, which will help shape the provisions and guidelines of the trust. This may include expenses related to housing, education, healthcare, therapy, recreational activities and other necessary or desired services.
2. Choose trustees: Select trustworthy and capable trustees who will be responsible for managing the assets in the VPT on behalf of the beneficiary. Consider family members, close friends or professionals who have the necessary skills and knowledge to handle the trust’s administration.
3. Create the trust deed: A lawyer will draft the trust deeds, which is the legal document that establishes the VPT and states the intentions, guidelines and provisions of the trust. It should also outline the powers and responsibilities of the trustees, including how they will make decisions and distribute funds for the beneficiary’s benefit.
4. Fund the trust: Transfer assets into the VPT as outlined in the trust deed. This can include cash, investments, property or any other suitable assets that will support the beneficiary’s needs. It’s crucial to ensure the transfer is done correctly to comply with legal requirements and avoid potential issues.

Once established, the VPT must be administered by the trustees and regularly reviewed to ensure it aligns with the beneficiary’s needs and comply with any changes in legislation or regulation.

How does a VPT differ from a Discretionary Trust?

The two main differences are the extent to which non-vulnerable beneficiaries can benefit and the relevant taxation that is to apply. The trustees of a VPT are restricted in terms of distributing to a non-vulnerable beneficiary to the lower of 3% of the Trust Fund and £3,000 in any one year, whereas a discretionary trust has no restrictions.  A VPT is taxed as if it was owned by the vulnerable beneficiary while a discretionary trust is taxed in accordance with the relevant property regime.

There are pros and cons to each approach, which makes it extremely important to consult with specialist professionals to ensure the trust structure best suited to the beneficiary’s circumstances is chosen.

Why choose Price Slater Gawne?

Our specialist team is experienced in setting up vulnerable beneficiary trusts. If you would like to speak to a member of the team, please contact 03333 058375 or email WealthProtection@psg-law.co.uk.