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Vulnerable Persons Trust

Also known as Disabled Persons Trust but they are not only for registered disabled persons.  They can be used for vulnerable people of all ages, for example an adult child who is unable to manage their own affairs due to a mental health condition (in accordance with the Mental Health Act 1983) but is not considered “disabled”. 


A vulnerable person can also be a child under 18 years whose parent has died. 


Vulnerable Persons Trusts are subject to more favourable, special tax treatment which can make them really useful for the long-term provision for a beneficiary.  However, to be eligible for this special tax treatment, the beneficiary must be in eligible for (not necessarily in receipt of) certain benefits, details of which can be found here: - Trusts and taxes: Trusts for vulnerable people - GOV.UK (www.gov.uk)

 

If there is more than one beneficiary and some are not considered vulnerable then it is important to note that only the part of the trust reserved for the vulnerable beneficiary will be subject to the special tax treatment. 


Trustees must actively claim for special tax treatment by completing a “Vulnerable Person Election Form” (VPE1) for each vulnerable person covered by the Trust.  This involves complex calculations in relation to the applicable tax reductions in any income or capital gains tax liabilities.   


If the vulnerable person dies or is no longer considered vulnerable, HMRC must be notified immediately and there may be special inheritance tax treatment, where applicable.   

Specialist tax advice should be sought when setting up a Vulnerable Persons Trust and on the death of the vulnerable person or ending of the trust. 


If the trust is set up by Will and the vulnerable beneficiary dies after the trust comes into effect, any assets remaining will be subject to the usual tax rules and the assets treated as part of the testator’s estate.  Therefore, inheritance tax may apply. 


If you have a vulnerable person to provide for either during your lifetime or by your Will, then please call us on 01208 812415 or email info@macmillans-solicitors.co.uk for a free ½ hour consultation, we will be happy to advise you. 

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