Could a trust protect our disabled children after we’re gone?

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Shares Magazine

12 November 2026

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We have two adult ‘children’ both with learning disabilities who will be living with us long term. As I and my wife are at retirement age we are naturally worried about how they will manage their personal finances after we are gone.

Trusts were in the news recently and the tax implications that can result – how do trusts work and what are some of the key things we should consider in terms of whether a trust may be appropriate for them?

Jon

You’re right that trusts can be incredibly useful for protecting vulnerable people after you’ve gone. However, setting up and managing a trust isn’t straightforward, so it’s a good idea to think things through now, while you have time.

The basics of a trust is that you put assets into the trust, it’s managed by trustees, who have legal ownership of them, but it is used for the benefit of the beneficiaries – which would be your adult children.

What are the options?

There are several different types, depending on what you want the trust to do, so the first step is to decide what kind you want. If you want the trust to be flexible, so it can pay out to the beneficiaries in the way the trustees think is best, you could consider a discretionary trust. This gives the trustees the ability to make decisions about how to use the income from the trust – and sometimes the capital.

They can decide which beneficiary to make payments to, how often and how much. They can also impose conditions on the money they pay out.

You can consider how much control you want the trustees to have and then write that into the trust deed. However, there are other kinds of trust, so it’s worth exploring all your options.

You also need to decide whether to set up a trust for your adult children now, and place assets into it for them today, or you can arrange for a trust to be set up as part of your will. This will depend partly on when you want the trust to start supporting them, but there are also tax implications.

Another major decision is who you will choose as trustees. This is key, because they have so much control over the trust. You need to be able to put your faith in them, and you need to be confident they will get along. This seems straightforward, but given that this trust could run for decades, you need to consider whether there’s any risk they could struggle to work together in the years to come, which can be extraordinarily difficult to assess.

There us a way to write the trust to adapt if these relationships break down, but it needs to be considered at the outset.

What you need from a trustee

You don’t always need a professional trustee – which comes with costs, but you need to be sure the people you choose have the experience and understanding to manage a trust. The tax calculations alone are often fiendishly complex and require meticulous record-keeping and hard work, so whoever you choose needs to be prepared to take this on. In many cases, people will use a professional to avoid all sorts of problems if trustees make mistakes.

Finally, you need to consider the instructions you set for the trustees, so the trusts give the right support at the right time without either running out or offering too little support and building up a surplus.

You also need to be aware of the tax considerations – and there are many of them. Trusts can usually make £500 of income tax-free. If they make any more than this, tax is paid on all the income at 45%. If those receiving the income pay tax at less than 45%, they may be able to claim some tax back. Trusts don’t get a dividend allowance either. Dividend income is taxed at 39.35%. Capital gains tax may need to be paid, and the annual exempt amount is lower for trusts – at £1,500 in the current tax year.

Then there’s inheritance tax. If you set up a trust as part of your will, then you may already have paid inheritance tax on the assets you put into the trust. However, the trust will still pay inheritance tax every 10 years on amounts over the nil rate band, at a rate of up to 6% and an exit charge of up to 6%, depending on when the last 10-yearly charge was made.

If you set it up during your lifetime, there is inheritance tax to pay at 20% when assets are transferred into a trust above the value of the nil rate band, then another charge every ten years from when it was set up – at up to 6% on amounts over the nil rate band, and another one when the trust ends. If the person setting the trust up dies within seven years, additional inheritance tax may be due.

When there can be tax breaks

Depending on your children’s conditions, they may be classed as ‘vulnerable beneficiaries’. This can be the case if they are eligible for certain types of disability benefits (even if they do not receive them), or you can check with their doctor that their conditions are covered by the Mental Health Act 1983. If that’s the case, the trust can apply for tax breaks.

As you can see, this is a complex area, and an awful lot will depend on the trustees, the trust deed, and your personal circumstances. It’s why it’s always worth getting advice when deciding whether to set a trust up. It makes sense to have professional help having the trust drawn up too, and often to run the trust after you have gone.