1. Wills, Discretionary Trusts & Disabled Person TrustsBy
Damien J Jones TEP
Wellers Law Group LLP
65 Leadenhall Street, London EC3A 2AD

2. Introduction Damien Jones LLB (Hons) TEP, Solicitor
Head of Wills, Probate & Trusts Department
Member of the Society of Trust and Estate Practitioners, Solicitors for the Elderly and the Law Society Private Client Section
Specialising in Probate, administration of estates, wills, powers of attorney, Court of Protection, trusts, Inheritance Tax planning

3. Wellers Law Group LLP
Established in 1881 and a growing firm of Solicitors
Offices based in London, Bromley and Surrey
Offering a complete range of legal services to individuals, families, businesses and charities
Delivering expert legal advice whilst retaining an approachable, client orientated service

4. Who has a Will? Only 1 in 3 people in the UK have a Will
Around 60,000 estates each year are ‘intestate’ (where there is no valid Will in place)
In 2010, the Treasury gained £53 million from people who died without leaving a Will – the year before it was £76 million
Surveys show that people put off making a Will, often until they are in their 50s

5. Why make a Will?
Lets you leave instructions about how your estate is to be distributed
Enables you to choose your own executors
Appoint guardians to look after children under the age of 18 years
Allows you to make specific gifts to individuals
If you have remarried, you can ensure any children from your first marriage get a share of your estate
A Will is a useful tax planning tool

6. What if I die without a Will?
Your estate is divided according to the rules of intestacy instead of your wishes
Your estate could be distributed between distant relatives whom you may not wish to benefit
Unmarried partners will not receive anything from your estate
If you have separated but not divorced, your ex-partner will still be entitled under the rules of intestacy
Absence of a Will can lead to family disputes

7. Does my estate pass to my spouse?
Your spouse may not receive as much as you would have liked them to
For example, if you are married with children, and your estate is worth more than £250,000
Your spouse will receive your personal belongings, the first £250,000 and one half of the remaining assets
The remaining one half will pass to your children

8. Some common mistakes in making a Will are?
Not being aware of the formal requirements needed to make a Will legally valid
Failing to take account of all the money and property available, or of the possibility that a beneficiary may die before you
Being unaware of the effect of marriage or divorce on a Will
Being unaware of the rules which exist to enable dependants to claim from the estate if they believe they are not adequately provided for

9. When is it particularly advisable to use a solicitor to draft your Will?
You share a property with someone who is not your spouse
You wish to make provision for a dependant who is unable to care for themselves
There are several family members, who may make a claim on your estate
You wish to incorporate a trust within your Will;
You own a business
Your permanent home is not in the UK, or you are resident in the UK but own overseas assets

10. Trusts for disabled & vulnerable persons
Provide financial stability for a disabled or vulnerable person throughout their lifetime
Management of assets for those incapable
Enable trustees to take into account beneficiary’s changing circumstances
Avoid the loss of state benefits and preservation of capital by ring fencing assets

11. What type of trust?
The type of trust depends on your personal circumstances, the flexibility needed and the value and type of assets involved
Two main options available are a Discretionary Trust (DT) and a Disabled Person Trust (DPT)

12. What is a Discretionary Trust (DT)?
Used where you like more than one person to benefit, and for trustees to decide how and when those people benefit
There has to be more than one beneficiary, might include disabled or vulnerable person, along with other children, grandchildren, charity
Trustees have flexibility in deciding how to use income and capital of the trust fund for the beneficiaries
Beneficiaries do not have a fixed entitlement to receive anything from the trust fund

13. What is a Discretionary Trust(DT)?
Trust fund held by trustees cannot be taken into account when assessing beneficiary’s entitlement to means tested benefits
Trustees can make decisions to meet changing requirements of disabled or vulnerable person during their lifetime
Trust funds should not be used in a manner which endangers any future claim for benefits

14. What is a Discretionary Trust (DT)?
Tax treatment is not favourable and needs to be carefully considered
Income Tax charged at 37.5% on dividends and 45% on all other income except for first £1,000 (2015/2106), no personal allowance
Capital Gains Tax charged at 28% with trustees only entitled to 50% of annual exemption (£5,550 for 2015/2016)
If value of trust fund exceeds Inheritance Tax threshold of £325,000, charge when trust set up, every 10 years (maximum rate of 6%) and whenever a payment is made from the trust

15. What is a Disabled Person Trust (DPT)?
Set up to specifically benefit a disabled person and is largely discretionary in its nature
Disabled person defined as someone who is;
by reason of mental disorder, incapable of administering their own property or managing their own affairs
in receipt of increased disablement pension, Attendance Allowance, Disability Living Allowance by virtue of entitlement to care component at highest or middle rate, Personal Independence Payment, Armed Forces Independence Payment

16. What is a Disabled Person Trust (DPT)?
Trust must provide during the disabled person’s life, at least ½ of any capital payments made out of the trust are paid or used for the disabled person
All income paid out of the trust must be paid or used for the disabled person

17. What is a Disabled Person Trust (DPT)?
Main advantage of DPT over a DT is the favourable tax treatment it receives
Trust will not incur any charges to Inheritance Tax when payments are made from the trust and the 10 yearly Inheritance Tax charges
For Income Tax and Capital Gains Tax, the trustees pay tax at the rate the disabled person would have paid
Trust aggregates to estate of disabled person and provided disabled person has few assets in their own right, can lead to a more favourable Inheritance Tax position

18. Which type of trust is more appropriate?
Number of factors to be considered before deciding which type of trust to use. Consider;
age of disabled or vulnerable person
nature and long term prognosis of any disability
needs of that person
For example, where they are to live, who will care for them, how the carers will be compensated and the needs of other family members

19. When should the trust be set up?
A Discretionary Trust and a Disabled Person Trust can be set up by any person;
during their lifetime by creating a Trust Deed or
on death under the terms of their Will

20. Who should the trustees be?
Appointment of suitable trustees is essential to ensure trust can run smoothly and provide appropriate provision for disabled or vulnerable person
If trust fund is of high value or complex, sensible to appoint an independent trustee
Can be family members, friends or professionals, or a mixture of these
Can be a beneficiary but to avoid any conflict, another trustee should be included who is not a beneficiary

21. What is a Letter of wishes?
Opportunity to explain to the trustees the reason for setting up the trust and guidance on how the trust fund should be used
Should be kept under review as your wishes and the needs of disabled or vulnerable person change
State how assets should be distributed to the other beneficiaries in the event of the death of the disabled or vulnerable person
Not legally binding, it can be referred to as guidance

22. Contact information
If you would like to discuss making a Will or setting up a trust, please do not hesitate to contact Damien Jones
Wellers Law Group LLP
65 Leadenhall Street, London EC3A 2AD
Tel: