Disabled Person's Trust

For the general law, see Understanding trusts.

What it is#

A trust that holds a fund mainly for one disabled person during their lifetime, set up to meet the special inheritance-tax rules for disabled beneficiaries. Meeting those rules means the fund is taxed on the more favourable footing (as if the disabled person had an interest in it) rather than as an ordinary discretionary trust.

The fund is a carve-out: you choose an amount - either a fixed sum or a percentage of the net estate - and it is set aside off the top, before the residue, so it never forms part of the residuary estate. It takes effect whenever this testator dies - on a mirror will, on the death of whichever spouse it's set for, whether that is the first or the second death.

The trust is designed to protect means-tested benefits: the trustees weigh the effect any payment would have on state benefits or state-funded care, aren't obliged to spend the fund in place of what the state would provide, and can hold money back for the disabled person's long-term welfare. Other beneficiaries can benefit too, but always after and below the disabled person, and never in a way that breaks the special tax treatment.

Who it suits#

• Any client providing for a disabled or vulnerable person who receives, or may come to receive, means-tested benefits or state-funded care.

Which will it goes in#

• Single wills - any number, each taking its sum before the residue.
• Mirror wills - any number. Which testator each one applies to - one half or both - is chosen at the quoting stage in the quote builder (the Configure trusts & additions drawer, using the testator columns and shared Both spouses block), not in the drafting form. The carve-out then fires on that testator's death, whether first or second.

Add it as an order line ("DPT Addition"). It takes its sum before the residue and coexists with any residue arrangement.

What you'll set on the form#

Trustees and beneficiaries#

The standard trustee settings apply - see the shared settings.

Note the beneficiaries list here is the secondary group - the people who may benefit alongside and after the disabled person, always behind the disabled person's primary interest.

The disabled person#

Setting	Type	Default	What it does
Disabled primary beneficiary	one person	-	Required. The main (disabled) beneficiary the trust is for. Must be a person (not a charity or company).

How the trust is funded#

You must give the trust a funding source - a DPT can't be created without one.

Setting	Choices	Default	What it does
How the trust is funded	A fixed sum (£) · A percentage	A fixed sum (£)	Whether the trust is funded by a fixed pound amount or by a percentage of the net estate.
Amount	a number (£ or %)	-	Required. The pound sum (when funded by a fixed sum) or the percentage of the net estate (when funded by a percentage - 100% or less).

Whichever you pick, the amount is set aside off the top, before the residue: it is taken from the estate before the residuary gift takes effect, so it never forms part of the residue. A percentage is measured against the value of the net estate at the date of death; 100% simply sets aside the whole of it.

Good to know#

• Funding is required. Every DPT sets aside either a fixed sum or a percentage; you can no longer create one without a funding source.
• Because it takes its amount before the residue (like the First-Death Capped Trust), it sits alongside any residue arrangement rather than competing with it.
• The single "disabled primary beneficiary" is the main beneficiary; the beneficiaries list is only the secondary group who may benefit later.
• The clause repeatedly directs the trustees not to do anything that would break the special tax treatment or prejudice the disabled person's benefits - that's the whole point of the trust.