Trusts are an effective tool for safeguarding the interests of vulnerable adults by providing a structured way to manage and protect assets.
Abacus has a great deal of experience in dealing with complex and sensitive scenarios. Below, our team of professional trustees outline the key reasons for the popularity of trusts for those at risk.
Financial protection & management:
- A trust ensures that the financial assets of vulnerable adults are managed responsibly. Trustees, bound by fiduciary duty, make decisions in the best interest of the beneficiary.
- This protection is particularly important for individuals who might be susceptible to exploitation or who may lack capacity to manage their own finances.
Tailored distribution:
- Trusts can be structured to distribute funds according to specific needs and circumstances.
- This flexibility can accommodate varying needs such as medical expenses, housing or daily living costs.
Continuity & stability:
- Trusts provide a continuous management structure, remaining in place regardless of changes in the beneficiary’s circumstances. This stability is vital for long-term care and financial planning.
Legal & tax benefits:
- Trusts can offer certain legal protections which can assist eligibility for government benefits.
- Properly structured trusts may also provide tax benefits, preserving more of the trust assets for the beneficiary.
Protection against exploitation:
- Trusts protect vulnerable adults from financial abuse by controlling how and when funds are accessed, minimising the risk of exploitation by unscrupulous individuals.
- Trustees have a legal obligation to act in the best interest of the beneficiary, providing an additional layer of security.
- An Isle of Man trust allows for the appointment of a Protector, which provides an additional layer of oversight for the Settlor.
Trusts are a versatile and powerful tool for protecting and managing the assets of vulnerable adults.
By establishing a clear framework for asset management, decision-making and oversight, trusts offer a robust mechanism for safeguarding against exploitation, abuse and financial mismanagement.
Establishment of a trust:
- A trust is established through a legal document known as a trust deed. It outlines the terms of the trust, including the trustee(s), beneficiary(ies) and how the assets are to be managed and distributed.
- The settlor, who established the trust, transfers assets into it, making them the property of the trust and then managed by trustees.
Selection of trustees:
- Trustees can be family members, friends, professionals or corporate entities. Careful consideration is needed in selecting trustees as they manage the assets and make decisions on behalf of the beneficiary(ies).
- A mix of family and professional trustees is often recommended to balance personal knowledge of the beneficiary’s needs with professional expertise in managing trust assets.
Management & distribution:
- Trustees manage the trust assets according to the terms set out in the trust deed. This includes investing assets prudently, paying bills and making distributions to or for the benefit of the vulnerable adult.
- The terms of the trust can specify regular distributions, discretionary distributions based on the beneficiary’s needs or distributions for specific purposes like education or medical care.
Monitoring & reporting:
- Trustees are required to keep accurate records of all transactions and provide regular reports to interested parties. This transparency helps ensure the trust is managed properly.
- Beneficiaries or their representatives can hold trustees accountable if they fail to act in the best interests of the beneficiary.
No action should be taken on the basis of this note, nor should it be construed as amounting to tax, legal or VAT advice. Suitable, specific and professional advice should always be obtained in respect on any particular issue.
