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Disabled person’s trust or standard discretionary trust? Stephen Horscroft explores strategic considerations for modern estate planning
- Disabled person’s trusts can provide substantial inheritance tax, income tax and capital gains tax (CGT) advantages while protecting means-tested benefits, but only where strict statutory eligibility requirements are satisfied.
- Standard discretionary trusts remain valuable where flexibility, wider family benefit or CGT holdover relief are priorities, making the choice of structure highly dependent on the client’s long-term objectives and family circumstances.
Families who wish to provide for a vulnerable or disabled beneficiary are presented with the challenge of how to deliver lasting financial protection without undermining vital state support or exposing the individual to financial risk. Trust structures are central to this planning, but the distinctions between disabled person’s trusts (which benefit from the bespoke tax regime in s 89 of the Inheritance Tax Act 1984) and a standard discretionary trust need careful consideration. Deciding which structure works best in the circumstances requires a nuanced understanding of tax regimes, statutory definitions of disability, and the client’s circumstances
