Disabled Beneficiaries Trust

Parents of disabled children require special estate planning. If you leave assets directly to your disabled child, either in a will or through the intestacy statutes if you died without a will, your child’s inheritance could give rise to 2 distinct possibilities

  • Vulnerability to the attentions of hangers one who would fleece your child
  • Compromise your child’s eligibility to social security and local authority benefits – in short except if you are a millionaire several times over, your wealth merely subsidising the council.

A Disabled Beneficiaries Trust can help preserve your child’s eligibility for public benefits while providing for supplemental needs that will enhance his or her life.

What is a Disabled Beneficiaries Trust?

A Disabled Beneficiaries Trust (DBT), is a discretionary trust created to hold the property of a disabled beneficiary and distribute supplemental funds to that individual in a way that preserves his or her eligibility for public assistance.

What is the benefit of a Disabled Beneficiaries Trust?

Several benefit programs are means tested, which means if the claimants wealth and, or income exceed certain limits, one’s eligibility would be compromised. That’s why it’s generally a bad idea to give assets, either as a gift or inheritance, directly to a loved one who is disabled and would otherwise be in receipt of public assistance.

Won’t any trust work?

Not all trusts will work to preserve a disabled beneficiary’s benefits. Support trusts, which direct that funds be used for the health, welfare, and support of a beneficiary, can disqualify a disabled beneficiary because the assets in a support trust are counted as the beneficiary’s resource.

A Disabled Beneficiaries Trust is a discretionary trust that allows a trustee to use trust funds to supplement, not replace, a beneficiary’s government entitlements. To maintain eligibility for needs-based support, the beneficiary cannot have control over the assets in the DBT. The beneficiary cannot manage the assets, have the right to demand distributions of income or property from the DBT, name the Trustee or change the terms of the DBT. The use of the DBT’s assets for the benefit of the beneficiary is determined at the discretion of the Trustee.

Beneficiaries of properly drafted Disabled Beneficiaries Trusts do not have legal claim to the property in the trust. That means that the trust assets are not countable resources and do not affect the beneficiaries’ eligibility for benefits. As a result, the beneficiaries are eligible for  social security and local government benefits, while still enjoying the benefits of the property in the trust for supplemental needs.