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Updated: Aug 12, 2022

Here are some of the key points of why you need to plan your estate when there is a vulnerable person in the family:

  1. Planning ahead financially allows you to make sure your relative is provided for in the long-term;

  2. If set up appropriately, a discretionary trust can overcome problems in qualifying for means-tested benefits and being charged for community care services after someone inherits money or property; and

  3. Because of the complicated issues relating to mental illness and wills and trusts, it’s important to seek help from an experienced solicitor.

Caring for someone with a mental illness does not always leave time to plan for the future. This post looks at the reasons why it is important to plan ahead and some of the problems you may come across. Consider: Why is it important that I plan ahead financially? What problems could there be for someone who comes into money? Discretionary trusts is a vulnerable persons trust, that can safeguard against what might happen if you do not make a will or trust.


Planning ahead financially allows you to make sure your relative has enough money for day-to-day living, long-term security or a bit of extra cash in addition to welfare benefits. A will allows you to state who is to benefit upon your death, what will pass to whom and under what conditions. Planning in advance can also help to avoid problems your relative may have in claiming benefits or being charged for services, like residential care, after inheriting money or property. To avoid these problems you may wish to consider leaving money in a discretionary trust. A discretionary trust can be set in the lifetime of the person making it or by will upon their death. Providing for people with mental illness raises complicated issues. The information here is based on the law in England and Wales.

Planning for the future: Wills and trusts RET0357


When planning ahead financially there are two important things to consider:

  1. Any welfare benefits being paid to the person who will inherit (this person is known as the ‘beneficiary’); and

  2. How well the beneficiary would be able to manage this sudden income.


If someone claims means-tested benefits such as Universal Credit and Housing Benefit, any money they receive or already have in savings will be taken into account when working out their entitlement. Receiving a large sum of money such as from a Will would result in means-tested benefits being refused or stopped. It could also result in the beneficiary having to pay for residential care and other services. But remember that if someone has been detained under a ‘treatment section’ of the Mental Health Act 1983 (sections 3, 37, 37/41, 47/49 and 48/49) they are legally entitled to free aftercare under section 117.

The aftercare is not dependent on any money someone has, so money from a will or trust should not affect their housing if provided under section 117. (Note that the Care Act 2014 (CA), however, now allows patients to pay a top-up to the s.117 aftercare if they choose (s.75 CA), for instance if the patient (or the person in charge of the patient's finances) wanted to pay more to stay in a more expensive residential home and the aftercare needed was residential care.) Non means-tested benefits such as Disability Living Allowance, PIP, Incapacity Benefit, Severe Disablement Allowance and Employment & Support Allowance are not currently affected by money or assets from a will or trust.


In some cases a person may not have the capacity to deal with money or property because of the effect of a mental illness, for example extravagant spending or being taken advantage of by others seeking money. In these cases the money may come under the control of the Court of Protection (CoP). The CoP would appoint a ‘deputy’ to make financial decisions on the person’s behalf. This process involves formality and quite a cost. The right sort of trust removes the need for the CoP to be involved.


Money from a discretionary trust is not currently regarded as money the beneficiary is entitled to, but as money legally belonging to the trustees. Trustees look after the money and decide how it will be used. This means that if managed in a certain way, the money would not be taken into account when the beneficiary applies for welfare benefits.


The trustees will be able to make ‘voluntary payments’ to a beneficiary from a discretionary trust. Whether regular or irregular, these payments should not be taken into account as income, so means-tested benefits should not be affected.


A discretionary trust should not contain conditions which would lead to money from the trust being seen as belonging to the beneficiary (unless that is what’s intended). So the intended beneficiary shouldn’t be the only person named in the trust; if they are the money could be treated as theirs. For example a brother or sister could also be named, even if it’s not planned for them to receive money.


It may be wise to have more than one trustee. There should be at least one professional trustee experienced in managing investments. Another trustee should be a member of family or close friend who is likely to be in regular contact with the beneficiary and is aware of his or her needs. When choosing trustees personal factors can be important. For example, how will the trustee deal with a demanding beneficiary who keeps asking for cash? Will the trustee be sympathetic but reasonably firm?


Although it’s possible to leave a house in a will (and this will not affect means-tested benefits as long as the beneficiary lives in it) you will need to consider, that with age or deterioration in their condition, the beneficiary may have to move into residential care. If this happens the value of the house would be taken into account by the Department for Work and Pensions to stop benefit entitlement. So if you would like a relative to remain in a property belonging to you after you have gone, there are advantages in putting the property in a discretionary trust.

Similar rules apply to property as with money. The property legally belongs to the trustees not the person living in the house so welfare benefits shouldn’t be affected. If you do not feel that your relative would be able to deal with maintenance and repairs, the trustees could handle this on their behalf, using money from the trust.

To cover additional costs of upkeep to the home, trustees could also think about charging rent to the relative living in the property who could perhaps claim housing benefit to pay for this. This should be possible unless the local authority could prove the trust was set up in order to take advantage of the housing benefit system. If you decide to do this, you should get further advice.


There can be tax disadvantages with a discretionary trust as they have their own rules. The tax issues that arise in the context of wills and trusts are complicated and you should always seek specialist advice.


If no Will is made then the money or property will be distributed to family members under legislation made in 1925 called ‘Laws of Intestacy’. The Laws are based on old-fashioned family values so the money would not necessarily go to the people you wanted it to go to.

For example an unmarried partner or children of an unmarried partner would get no money at all. It is unwise to decide not to leave money for a relative assuming welfare benefits will always offer support, as the rules may change. Leaving money secretly for someone would mean that any claim made for welfare benefits or local authority financial support without disclosing the money would be against the law.

Your Will serves as the starting point. Our book discusses the fundamentals of what goes into the process of writing a will and how it relates to other aspects of estate planning, such as the establishment of a trust for the benefit of someone young, an old person, a person with a mental illness, or someone who is disabled. In this book, you should be able to learn all you need to know in order to write a Will that is important and about a trust for a vulnerable person.

Writing a will

Creating a discretionary trust


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