Glossary · UK
What is Disabled Person's Trust?
A trust set up to benefit a disabled or vulnerable person, qualifying for special, more favourable Inheritance Tax and other tax treatment.
Full Definition
A disabled person's trust is a type of trust created to hold assets for the benefit of someone who is disabled or vulnerable, often a family member who cannot manage money themselves or whose means-tested benefits could be affected by holding capital directly. Where the trust meets HMRC's definition of a qualifying trust for a disabled person, it receives more favourable tax treatment than ordinary discretionary trusts. In particular it can avoid the usual ten-year anniversary and exit charges for Inheritance Tax, and the trust's income and gains may be taxed as if they belonged to the disabled beneficiary, who can use their own allowances such as the Capital Gains Tax Annual Exempt Amount of GBP 3,000. The standard nil-rate band of GBP 325,000 remains relevant to wider estate planning. It matters because it lets families provide for a loved one while protecting benefit entitlement and reducing tax. Setting one up needs specialist legal advice.