Discretionary Will Trust rules Post - 2024

Mumum

Hello, I need to check three quick points regarding my Will structure for my son who is on LCWRA and Universal Credit.

Firstly, the DWP Risk: Under the strict post-2024 DWP guidelines, is it safer to leave my Will as a generic discretionary trust where my son is not named directly ("direct descendants and charities"), or should I name him in a statutory Disabled Person's Trust? Which option carries the lower risk of a DWP 'deliberate deprivation' challenge?

Secondly, the Trustee Lock: If he is named as a beneficiary and as a joint co-trustee alongside two of my independent friends - requiring completely unanimous sign-off for all actions - does this joint lock fully satisfy the DWP guidelines to score his personal capital value from the trust as £0?

Thirdly, the 45% Tax Shield: If I am forced to use a generic discretionary trust, it will face the flat 45% trust tax rate on my NS&I bond interest. Realistically - not just theoretically - is there any actual way to legally shield the trust from paying that 45% tax, or is a Section 89 Disabled Person's Trust the only genuine way to get a rate based on his own tax rate?

Please note: I am looking for factual legal/DWP guidance only, please. This money (Personal Injury for cancer misdiagnosis) is a protective safety net for my son, who has autism, severe executive dysfunction, and chronic fatigue. While I am hoping these funds might eventually serve as a mortgage deposit to secure him a stable home, his conditions mean we genuinely do not know what his future holds or what he will be capable of managing.

This trust is strictly a vital medical and financial safety net to protect his long-term survival and safety (he only has me) so I would deeply appreciate responses sticking strictly to the legal mechanics. Thank you.

HillStreetBlues

https://forums.moneysavingexpert.com/discussion/6683059/discretionary-will-trust-rules-post-2024

First, if you set the Trust up correctly then it can't be deprivation of capital as your son has never had the money, you can't deprive yourself of something you never had. This issue can occur if a benefactor places money into a Trust without it being stated in a will. In your case it will go from being your money to the Trust's money.

Second, yes if your son is a trustee then he would need at least one other person to protect the money from income related benefits, but two other trustees is far better.

Third, I can't comment on the tax issue as haven't the knowledge.

kaMelo

You may have more success with answers to your third question by posting on the 'deaths, funerals and probate' board.

https://forums.moneysavingexpert.com/categories/deaths-funerals-probate

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/82134328#Comment_82134328

I have asked the mods to move this thread there.

I would recomend you consult a STEP solicitor who has the appropriate qualifications to draft a will containing such trusts.

poseidon1

My advice is to forget about a full blown discretionary trust entirely.

If the 45% income tax burden were not disincentive enough the cost, accounting and general administrative headache involved with such trusts is only justifiable where a very high 6 figure amount is to be settled. Is the amount to be settled under your will likely to be of that magnitude?

A statutory s89 disabled person's trust should more than suffice for all the objectives you have in mind especially avoiding intervention by the DWP, after all that was the stated purpose of such trusts when the legislation was introduced - see below

https://www.wrigleys.co.uk/news/tax-and-estate-planning/disabled-persons-trusts-a-guide-for-parents-carers-and-advisers/

However, give the cormobidities you say your son suffers from, I would question the wisdom of him being made a co trustee of this arrangement. You do point out he suffers from executive dysfunction which may interfere/delay important trust decision making the trustees might need to action on his behalf.

Finally, is there any reason why you are not returning to the solicitor who originally helped you with your own personal injury bare trust, to advise on the best Will trust for your son? Surely that solicitor would be best placed to offer an informed view, given you already have a pre- existing relationship.

Mumum

https://forums.moneysavingexpert.com/discussion/comment/82134628#Comment_82134628

It's currently in the region of £43.5k. Original solicitor, Co-op Legal Services, changed the Will Trust to a general "descendants & charities" (from a disabled one naming him) for me 2 years ago, after I contacted them querying the 2024 rules change.

They assured me this would be the safest way, however I had been unaware of the horrendous tax implications, even with a wrapper to avoid tax (eg insurance) there are costs to pay and uncertainty.

I am trying to do my own independent research, although may need to pay a STEP solicitor to be certain.

Two friends will be named as Trustees, he would be a third just as an extra security measure (his signature would also be required to remove funds).

Thank you for the link. I shall check it out after posting this. I've been struggling to find legislation/guidance which explicitly states post-2024. I do however recall that the changes were updated due to parents abusing that rule by deliberately leaving an inheritance in a Trust.

Mumum

There should also be £70k life insurance paid directly to my estate and into the Will Trust. I'm hopeful they should pay out as they required full access to my medical records post-cancer diagnosis.

Mumum

Apologies for the third reply, I realise I hadn't fully answered your question. I haven't directly returned to Co-op Legal Services as there is a small chance they may have given me incorrect information, therefore I am trying to find the official rules myself online.

Mumum

AND one more post - your link is dated 2023 unfortunately, before the rule changes came into play.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82135078#Comment_82135078

Unless you have seriously overstated the extent of your son's disabilities and his future potential abilities to engage and actively participate in the administration of a s.89 trust on his behalf, I still struggle with the rationale behind your decision for him to be an active trustee.

Certainly if I were a professional trustee being approached in this circumstance, I would respectfully decline to act, and given that unpaid lay trustees would be burdened with responsibilities for which they could be held personally accountable, forcing them to work with a co trustee whose decision making abilities may be impaired, would seem unfair on them. Have you discussed this aspect with your friends and are they comfortable with this?

I appreciate your desire to conduct your own research on the Will trust options open to you, but there will be vanishingly few people on this or any other MSE forum who can provide the kind of 'factual/legal guidance' you seek.

I may well be one of the very few with that degree of professional insight, and I remain of the view your optimum approach should be to engage a Step qualified solicitor to settle your Will sooner rather than later. Was the firm you accessed via Co op legal services, STEP accredited?

However I must confess with a potential trust fund value of only £44k you would have been priced out of access to the kind of firms I worked for.

Finally to assist your personal research, see also the following general guidance and overview, especially where a parent has left no will in favour of a disabled beneficiary -

https://withfarra.co.uk/guides/no-will-disabled-beneficiary

Mumum

The intention was for there to be very little to do, other than invest in low risk bonds or accounts. The same as my PI Bare Trust. Ideally it would go towards a mortgage, depending on how he gets on, in which case Trust dissolved. He's always going to need some sort of support (EHCP - high level needed at school) and DSA support when he goes to university (Computing). I had misunderstood the Tax implications with the newer Trust. It wasn't explained to me (although I'm not sure Co-op are obliged) and I had somehow believed Tax to be set at around 5% or 8%.

My son will work, but reliability is going to be a factor. The money is to ensure he is always safe and never homeless. It is not intended as a regular dip in and out. I do not expect the Trustees to be regularly active nor maximise growth. Just to enable the Trust to exist, so that he can always be safe (he'll be without family).

Any Trustee who had a problem with an extra signatory and extra layer of protection wouldn't be the right Trustee for me. I would absolutely expect them to do the same if reversed, and I am 100% trustworthy, as are they. All sorts of scenarios could arise, both could leave the Trust (or heaven forbid die). To me it's just common sense. Or one remaining Trustee could add a new partner as Trustee, who they could be unaware is untrustworthy, then die leaving only the new partner as Trustee. I've lived the sort of life which unfortunately leads me to think of every worse case scenario!

I agree with the burden of the current Trust scenario and do not wish that for the Trustees. I realise I have been foolish to be so unaware. I am very hopeful that a Disabled Person's will suffice for DWP purposes during autistic burnout and that the funds can be invested in low risk bonds or high interest account and Tax paid according to his own personal Tax rate. In an ideal scenario he will manage full-time employment (autistic so needs to be a strong interest for him to engage) and use the money towards owning his own home. He does qualify for a Disabled Persons Trust according to their criteria.

It would cost under £100 to change the Co-op Will Trust back to a Disabled Trust and up to £1K for a new one to be drawn up. If needed, how vital is it for a STEP solicitor to draw up a new Will?

Thank you for your time.