How Vulnerable Person Trusts Can Protect Benefits and Long Term Security

When you care about someone who is vulnerable, financial planning stops being theoretical very quickly. A well meant gift can undo years of careful support in one bank transfer. I see it far more often than I’d like. That’s exactly where a Vulnerable Person Trust earns its keep.

What Is a Vulnerable Person Trust?
A Vulnerable Person Trust is a type of discretionary trust designed to hold money or assets for someone who is vulnerable due to disability, illness, or limited capacity. The key point is this: the assets in the trust are not treated as belonging to the beneficiary. That matters, because it means vital means tested benefits are not automatically lost.

Protecting Means Tested Benefits
If a vulnerable person receives money outright, even with the best intentions, it can trigger a benefits assessment. The result is often reduced or stopped benefits. A Vulnerable Person Trust allows funds to be used for the person without being legally theirs. Bureaucracy meets compassion, and in this case, compassion wins.

Why It Has to Be Discretionary
For a trust to be discretionary, there must be at least two potential beneficiaries. This is non negotiable. One person alone does not make a discretionary trust, no matter how much you might wish it did. In practice, this usually means naming the vulnerable person and at least one other beneficiary, often siblings or a class of beneficiaries. Think of it as giving the trustees room to move rather than boxing them in.

Control Without Crushing Independence
Trustees control how and when money is used, which protects against exploitation, impulsive spending, or well meaning but unhelpful interference from others. The trust can still be flexible. Funds can be used for care, equipment, hobbies, holidays, or simply making life easier. This is about support, not restriction.

Lifetime or Testamentary Trusts
A Vulnerable Person Trust can be set up in two ways:

• During your lifetime, which is useful if support is needed now
• Within a will, so the trust only takes effect on death

Both routes work. The right one depends on timing, family dynamics, and how much sleep you’d like at night knowing things are properly sorted.

Tax Treatment
When drafted correctly, these trusts can benefit from favourable tax treatment. That means more money going where it should, and less disappearing into the Treasury’s black hole. Always a win.

Why the Drafting Really Matters
This is not an area for templates or guesswork. Get it wrong and benefits can be lost or tax reliefs missed. The structure, wording, and choice of trustees all matter. A lot.

In Short
Vulnerable Person Trusts are one of the most effective ways to protect benefits while still providing meaningful financial support. Whether created during life or through a will, they offer protection, flexibility, and peace of mind. Done properly, they stop good intentions turning into expensive mistakes. And honestly, that alone makes them worth it.