Taking Care of Vulnerable Loved Ones After You Die

21 October, 2025 5 minutes reading time

It’s a deeply personal and often challenging topic: how do you ensure financial stability and a good quality of life for a vulnerable or disabled loved one after you pass away? For many, leaving an inheritance is an important part of their legacy.

However, a simple lump sum gift could unintentionally harm a vulnerable beneficiary and jeopardise their eligibility for vital state benefits, social care, or housing support.

If your loved one relies on means-tested government assistance (such as Universal Credit, Housing Benefit, or Income-related Employment and Support Allowance) or may struggle to manage a large sum of money, proactive legal planning is essential. You can’t simply include them in your Will; you need a structured approach to safeguard both their inheritance and their crucial support network.

The £16,000 Capital Limit

In the UK, most means-tested benefits have limits on your loved one’s total capital (savings, investments, and most inheritance):

• £6,000: Savings above this amount will start to reduce their benefit payments.
• £16,000: Savings over this level generally make them ineligible for Universal Credit and other working-age means-tested benefits.

An outright inheritance of more than £16,000 will therefore result in the complete loss of these essential benefits.

The Power of Specialist Trusts

The foundation of estate planning for a vulnerable beneficiary is establishing a trust within your Will. A trust is a legal arrangement where Trustees oversee assets for a specific person (known as a beneficiary). Because the Trustees manage the funds—not the beneficiary directly—the assets generally don’t count against the beneficiary’s capital limit for means-tested benefits.

In this scenario, there are two main types of trusts to consider in the UK.

ONE: Disabled Person’s Trust (DPT) / Vulnerable Person’s Trust

A specific type of trust created for beneficiaries who meet the legal definition of ‘disabled’ (often by qualifying for certain benefits like PIP or Attendance Allowance).

The Key Benefit

It offers significant tax advantages. Trustees can choose to have the trust’s income and capital gains taxed at the disabled beneficiary’s personal rates. DPTs are also exempt from the 10-year and exit charges that apply to other trusts.

Purpose

The trust must mainly benefit the beneficiary, acting to supplement rather than replace state funding.

TWO: Discretionary Trust

A flexible trust where Trustees have full discretion over who benefits, when, and how much. The vulnerable person is usually among several beneficiaries, which may include siblings, children, or charities.

The Key Benefit

It provides maximum flexibility. Trustees can respond to the beneficiary’s changing needs and updates in government benefits policy. Like a DPT, the assets do not impact means-tested benefits.

Consideration

This remains a strong option if the beneficiary’s eligibility for DPT status is uncertain or if the primary aim is to ensure that any remaining capital passes to the wider family later. However, it may attract less favourable tax treatment, such as periodic Inheritance Tax charges, compared to a DPT.

The Critical Role of a Will

Your Will is the foundation. It not only specifies who inherits your assets, but also allows you to nominate guardians for minor children and establishes the trust mechanism to manage assets for an adult beneficiary. Without a Will, intestacy rules apply, passing assets directly. This can be disastrous, leading to a loss of benefits.

Letter of Wishes

A trust deed is a legal document, but it cannot cover every detail of your loved one’s life. That’s why a Letter of Wishes is valuable. This non-binding document sits alongside the trust and acts as a personal guide for your Trustees. Use it to outline:

– The beneficiary’s routines, medical needs, preferences, and dislikes.

– Your principles for how the money should be used (e.g., prioritising quality of life, travel, or therapy over basic living costs that might be covered by state benefits).

– Advice on communicating with the beneficiary’s primary care providers or guardians.

– Your long-term plans for any capital remaining after the beneficiary’s death.

Choose Your Trustees and Successors Carefully

The individuals you choose to manage the Trust become the de facto financial managers of your loved one’s future. This role requires financial expertise, administrative discipline, and a thorough understanding of the beneficiary’s needs.

Consider a Mix of Personal & Professional

Many choose a combination of family members—who offer compassion and personal insight—and a professional trustee, who provides legal and financial expertise and ensures compliance with HMRC and DWP regulations.

Address Capacity

If the vulnerable beneficiary is an adult and still has legal capacity, encourage them to establish Lasting Powers of Attorney (LPAs) to appoint someone to manage their affairs should they later lose capacity.

Our Advice

Planning for a vulnerable or disabled loved one is arguably the most complex and crucial form of estate planning. It involves navigating the intersection of HMRC tax rules, DWP benefit regulations, and the deeply personal needs of your family.

This is not a do-it-yourself task. To protect your loved one’s inheritance and ensure their vital benefits, always seek advice from experienced lawyers specialising in Wills, Trusts, and the Court of Protection, alongside a financial advisor. Additionally, carry out regular reviews to keep the arrangements compliant with current legal and tax regulations.

The peace of mind gained from a properly secured future is invaluable. For more information or assistance, please feel free to contact us. We are here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

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