hgh dhea metformin

Calendar

January 2011
M T W T F S S
 12
3456789
10111213141516
17181920212223
24252627282930
31  

Pages

Archives

Recent Posts

Blogroll






 

Families often worry about how they can best provide financially for a disabled relative who outlives them. We look at the planning options.

By Kara Gammell
Published: 12:13PM BST 10 Jun 2010

More than one million people in Britain have learning disabilities and sorting out their financial affairs can be complicated.

A worry that weighs heavy on the minds of their families is how their loved one will manage their financial affairs when they are no longer around.

Many of these families are concerned that an inheritance may put their family member in a vulnerable position or mean that their means-tested state benefits are cut.

Setting up a trust means you can leave money for a vulnerable person without them having to worry about the responsibility.

This is a legal arrangement that allows a person or an organisation to look after someone else’s money. If you do not set up a trust, you run the risk of a trustee you have not chosen being appointed in the event of your death.

If properly set up, the trust will ensure that your loved one will continue to be provided for and continue to receive the government support they are entitled to. If they inherit all of the money themselves, they may miss out on some of this support.

Families interested in setting up a trust need to find a solicitor with the relevant experience. Lawyers for People with Learning Difficulties is a special-interest group recognised by the Law Society (www.lpld.org; 020 7405 1234). Here, families and parents can find solicitors who have the necessary expertise in areas of the law such as community care, benefits, disability discrimination and the question of capacity.

Mencap can also provide a list of solicitors with specialist knowledge on this subject by visiting www.mencap.org.uk/willsandtrusts or calling 020 7696 6925.

The next thing to do is to decide who you would like to manage the trust – these people are called trustees. You can appoint between one and four trustees, but it is normally a good idea to appoint at least two. It is also recommended to have at least one trustee who is not a family member or a beneficiary of the trust, to ensure there is an independent person helping make decisions.

People to consider are family members, friends, professionals, such as your solicitor or accountant, or institutions, such as a bank’s trustee service.

It is also worth leaving the trustees a ”letter of wishes”, which will outline what you would like to happen after you are gone. Items to consider are pocket money, clothes and equipment, trips and holidays, extra support, health care and living accommodation.

This letter should explain the reason for setting up the trust, guidance on how it should be used, and how the money should be distributed in the event of the beneficiary’s death – for example to other family members or a favourite charity. While the letter may not be legally binding on trustees, it can be referred to as guidance.

One option for families is to create a discretionary trust to deal with the whole of the estate and to rely on the trustees of your will to divide this between all your beneficiaries after your death.

This type of trust provides enough flexibility that a trustee can distribute funds depending on their needs at the time, but leaving the money in the trust to look after a vulnerable loved one.

None of the beneficiaries have an absolute right to all the money in the trust, nor the income that comes from it – they only have a potential right. Crucially, as the beneficiary is not “entitled” to the money, this means that the money and any other assets in the trust will not be taken into account when assessing for means-tested funding.

The only thing that will be taken into account is the actual money that has been paid out to the individual. In addition, the assets will not be treated as part of their estate on their death for inheritance tax. This is not true for all trusts – so it is crucial that you discuss with a solicitor the type of trust you want and how it might affect someone’s right to state funding.

Another option is a disabled person’s trust, a special kind of discretionary trust that can be created for a person who is incapable of looking after their affairs or is entitled to a disability living allowance at the highest or middle rate. This may include adults who have become unable to look after themselves due to an illness or accident, such as a brain injury.

Under the terms of this trust, the individual with a learning difficulty or disability would be named as the primary beneficiary of the trust and other beneficiaries, such as other children for example, would be named in a separate class of beneficiaries.

However, if the trustees decide to make a payment from the capital of the trust to any one of the beneficiaries of the trust they must also make the same payment to the primary beneficiary.

These trusts can ensure that the vulnerable individual still qualifies for state benefits and care home funding. It is perfectly legal and is not considered hiding assets in order to qualify for benefits.

Sheralee Ellis, senior financial adviser on the personal injury team at AWD Chase de Vere, said: “This type of financial planning is about planning for the future, rather than avoiding tax and fees. When it becomes a problem is when it looks like deliberate deprivation of capital. In other words, if you were setting up a trust simply to avoid paying inheritance tax et cetera.”

This brings up another cause for concern for many families in this position. Setting up a trust for a vulnerable beneficiary, means that the trustees can claim special treatment for income tax and capital gains tax, provided it is considered a ”qualifying trust”.

According to HM Revenue & Customs (HMRC), the definition of a qualifying trust is that the person who set it up will not receive any benefit or financial gain from the trust. The property in these trusts can be used only to benefit a vulnerable person and they must be entitled to all the income or, if they are not, none of the income can be applied for the benefit of anyone else.

To claim special tax treatment for income tax and capital gains tax, trustees must fill in form VPE1 (Vulnerable Person Election) and send it to the HMRC Trusts Office that deals with their trust. They must sign it, along with the vulnerable beneficiary – or someone who can legally sign on the behalf of the beneficiary.

Trustees have to give details of all the property in the qualifying trust, including anything used only partly for the vulnerable beneficiary. They will also have to show how the trust income is shared out. These qualifying trusts are also eligible to get special inheritance tax treatment.

Ms Ellis explained: “A gift or transfer into a qualifying trust for a disabled person is treated as a ‘potentially exempt transfer’ (PET) – which means that there is no immediate life charge on transfers made out of either type of qualifying trust to the vulnerable beneficiary.”

However, when the beneficiary dies, any assets held in the trust on their behalf are treated as part of their estate and may be liable for inheritance tax.

Louise Somerset, tax director at RBC Wealth Management, said that the assets in this type of trust should be taxed as if they belonged to the beneficiary personally, even though the beneficiary does not legally own or control them.

She said: “Such a trust is often useful where the beneficiary is not able to manage his or her affairs due to a disability. In these circumstances a family member may want to make sure that the beneficiary is financially provided for, without making an outright gift.”

If a “normal” trust was used in these circumstances, all sorts of tax charges could arise. IHT would be due on the initial gift if it exceeds the nil rate band (currently £325,000) and on the value of the trust every 10 years. Exit charges would also apply on payments of capital out of the trust. CGT would be payable at trust rates, with only limited annual exemptions available, and the same applies to income tax – which can have a particularly harsh effect since trusts pay income tax at a rate of 50pc.

“Trusts for vulnerable beneficiaries avoid all of these problems,” Ms Somerset added. “Instead, so long as the beneficiary remains vulnerable under the terms of the law, the trust will be looked through for tax. IHT is only payable on trust assets when the beneficiary dies – so no charge on the original gift.

Income tax and CGT are both payable as if the beneficiary had received funds personally, allowing full advantage to be taken of tax allowances and lower rate tax bands.”

Remember, once you have set up a will, it is important to review it regularly. Changes in your life, such as marriage, divorce and financial circumstances can affect your will. You can make small alterations to an existing will by adding an additional written instruction, which is known as a codicil.

Source:  http://www.telegraph.co.uk/finance/personalfinance/consumertips/7816757/Preparing-the-financial-future-for-people-with-learning-disabilities.html



Leave a Reply

*