Disabled Person's Trust in a Will UK (2026): Protecting a Vulnerable Beneficiary
Updated 14 May 2026 · 8 min read · England & Wales
Leaving money directly to a disabled loved one can inadvertently cost them their means-tested benefits — Universal Credit, Housing Benefit, and local authority care funding all take account of capital above £16,000. A disabled person’s trust (DPT) in a will solves this problem: assets pass into a discretionary trust rather than to the beneficiary directly, keeping them outside the capital assessment while the beneficiary still benefits. Qualifying DPTs also receive significant IHT and CGT advantages over ordinary discretionary trusts.
How a disabled person’s trust protects benefits
In a discretionary trust, the beneficiary has no automatic right to demand the assets — only the trustees decide when and what to pay. Because the beneficiary has no entitlement to the capital, the DWP and local authorities do not treat it as the beneficiary’s capital for means-testing purposes. The trust assets sit outside the £16,000 capital ceiling that would reduce or eliminate Universal Credit and similar benefits.
Payments actually made from the trust to the beneficiary in a given period may be treated as income or capital — so trustees should consider making payments directly to third parties (care providers, service suppliers) rather than cash payments where possible.
Tax advantages over ordinary discretionary trusts
| Tax | Ordinary discretionary trust | Qualifying DPT |
|---|---|---|
| IHT — entry charge | 20% on value above £325,000 NRB | No entry charge (outside relevant-property regime) |
| IHT — 10-year charge | Up to 6% of trust value every 10 years | No 10-year periodic charge |
| Income tax rate | 45% on income above £1,000 threshold | Beneficiary’s personal rate (if basic-rate taxpayer) |
| CGT annual exempt amount | £1,500 (2026/27) | £3,000 — same as an individual |
Who qualifies as the disabled beneficiary?
The beneficiary must meet the Schedule 1A Finance Act 2005 definition at the time the trust is set up (death of the testator). This broadly covers:
- Mental disorder — incapable of managing their own affairs under the Mental Health Act 1983
- Disability benefit recipients — anyone receiving (or entitled to receive) Personal Independence Payment, Disability Living Allowance (middle/higher care or higher mobility), Attendance Allowance, Armed Forces Independence Payment, Severe Disablement Allowance, or 100% Industrial Injuries Disablement Benefit
The beneficiary need only be entitled to the relevant benefit — not necessarily actively claiming it. This is important for children with disabilities who have not yet had a benefit claim made on their behalf.
The critical 97%/3% rule (post-April 2013)
For trusts established on or after 8 April 2013, the trust deed must explicitly state that at least 97% of all payments from the trust during the disabled beneficiary’s lifetime must benefit that beneficiary. No more than 3% (or £3,000 per year, whichever is lower) can benefit anyone else. This restriction must appear in the will trust provisions — omitting it results in the trust being treated as an ordinary discretionary trust with full relevant-property IHT charges. This technical drafting requirement makes specialist legal advice essential.
Trustee selection and the letter of wishes
Good trustee selection is central to a DPT working in practice. Recommended structure:
- Two to four trustees who know the beneficiary’s needs
- At least one independent professional trustee (solicitor or trust corporation) for continuity
- The disabled beneficiary should not be their own trustee — this can compromise benefit protection
A detailed, regularly updated letter of wishes should accompany the will. This guides trustees on how to use funds — care top-ups, holidays, specialist equipment, quality-of-life expenses — without legally binding them, preserving the discretion that makes the trust effective for benefit protection.
Frequently asked questions
What is a disabled person's trust in a will?
A disabled person's trust (DPT) is a specialist form of discretionary trust written into a will for the benefit of a qualifying disabled beneficiary. When assets pass into the trust on the testator's death, the disabled beneficiary does not own the assets directly — the trustees hold them for the beneficiary's benefit. Because the beneficiary has no direct entitlement to the assets (only trustees can decide what payments to make and when), the trust assets are not counted as the beneficiary's capital for means-tested benefits assessments (Universal Credit, Housing Benefit, local authority care funding means-tests). The trust therefore protects the inheritance from depleting the beneficiary's benefit entitlement, while the beneficiary still benefits from the funds when needed — for care top-ups, holidays, equipment, or quality of life expenses that benefits do not cover.
Who qualifies as a 'disabled person' for a DPT?
For the trust to qualify as a 'disabled person's trust' with the associated favourable tax treatment, the beneficiary must meet the definition in Schedule 1A Finance Act 2005 at the time the trust is set up. This requires that at that time the beneficiary: (a) is incapable of administering their property or managing their affairs by reason of a mental disorder under the Mental Health Act 1983; OR (b) receives, or is entitled to receive, one of the following benefits: Attendance Allowance; Disability Living Allowance (middle or higher rate care component, or higher rate mobility component); Personal Independence Payment (either component at enhanced rate, or daily living component at standard or enhanced rate); Armed Forces Independence Payment; Severe Disablement Allowance; or Industrial Injuries Disablement Benefit (100% disablement rate). Critically, the beneficiary need only be entitled to receive these benefits — they do not need to be actively claiming them. A child with autism who would qualify for DLA, but whose family has not claimed it, can still be the qualifying beneficiary of a DPT.
What is the favourable tax treatment for a disabled person's trust?
A qualifying disabled person's trust is treated as a 'vulnerable beneficiary trust' for UK tax purposes, conferring three significant advantages over an ordinary discretionary trust: (1) Inheritance tax: the trust assets are outside the relevant-property IHT regime — meaning no 20% entry charge when assets enter the trust above £325,000 (unlike ordinary discretionary trusts), and no 10-year periodic charges on the trust assets. On the disabled beneficiary's death, the trust assets are aggregated with their estate for IHT — but the trustee/beneficiary structure means this is normally at nil or low rate given the beneficiary's likely modest personal estate and the IHT spouse/charity exemptions available. (2) Income tax: the trustees pay income tax at the basic rate (20% on non-savings income), and if the disabled beneficiary is a basic-rate taxpayer, the trust income can be taxed at their personal rate rather than the 45% trust rate that applies to ordinary discretionary trusts. (3) CGT: the trust's annual exempt amount is £3,000 — the same as an individual (ordinary trusts get only £1,500), reducing tax on trust asset disposals.
What is the 97%/3% rule for disabled person's trusts?
For trusts established on or after 8 April 2013, the trust deed must include a specific restriction in order to qualify for the favourable tax treatment: at least 97% of all payments from the trust must benefit the disabled beneficiary during their lifetime. No more than 3% (or £3,000 per year, whichever is lower) can benefit any other person. This means the trust cannot be used as a wider family inheritance vehicle — it must be substantially for the disabled beneficiary. The practical implication is that the will drafter must include this 97% restriction explicitly in the trust provisions. If the restriction is omitted, or if trustees make payments that breach it, HMRC will treat the trust as an ordinary discretionary trust and apply the full relevant-property IHT regime (20% entry charge, 10-year charges). This is a technical drafting requirement that makes a specialist solicitor's involvement in drafting the will highly advisable.
How should trustees be chosen for a disabled person's trust?
Trustee selection is critically important for a disabled person's trust, because the trustees have full discretion over how and when to apply trust funds for the beneficiary's benefit. Recommended approach: appoint two to four trustees who know the beneficiary personally and understand their needs and preferences — typically a parent or sibling (who understands the person), plus an independent professional trustee (solicitor or trust corporation) to provide oversight and continuity. Avoid appointing the disabled beneficiary as their own trustee — this can compromise the means-tested benefits protection. A letter of wishes (non-binding but practically important) should accompany the will, setting out the testator's wishes for how trust funds should be used — for example: care home top-up fees; holidays and leisure; specialist equipment; support worker costs; quality of life expenses. The letter of wishes should be updated regularly to reflect changes in the beneficiary's circumstances and needs.
What happens to a disabled person's trust on the beneficiary's death?
On the death of the disabled beneficiary, the trust fund is distributed to the remaindermen — the final beneficiaries named in the will trust. These can be: siblings of the disabled beneficiary; other family members; or a charity. For IHT purposes, the trust assets are added to the disabled beneficiary's estate at death and assessed for IHT with their other assets. However, if the remaindermen are the disabled beneficiary's siblings, the transfer is treated as if the disabled beneficiary had made it — so the normal IHT rules apply (40% above nil rate band, less the disabled beneficiary's NRB). If the remaindermen are charities, the transfer is exempt from IHT. Some families structure the remainderman gift to a charity as a long-stop, with the primary remainder to siblings — using the charitable IHT exemption as a planning tool if the siblings predecease the disabled beneficiary. As with all trusts, specialist legal advice on the will drafting is strongly recommended.
Can a disabled person's trust affect Universal Credit or Housing Benefit?
A properly structured disabled person's trust should not affect Universal Credit, Housing Benefit, or local authority care funding assessments, because the trust assets are not treated as the beneficiary's capital. The DWP and local authorities treat discretionary trust assets as the beneficiary's capital only if the beneficiary has an absolute entitlement to demand payment — in a properly drafted discretionary DPT, they do not have that entitlement. However, any payments actually made from the trust to the beneficiary in a given period may be treated as the beneficiary's income or capital in that period, depending on the nature of the payment and the benefit claimed. Payments made directly to third parties on the beneficiary's behalf (a care home, a service provider) are treated more favourably than cash payments. Benefits rules change frequently — always seek specialist welfare benefits advice alongside the legal trust drafting to ensure the trust is structured to protect the specific benefits the beneficiary receives.
Protect your family with the right will
A disabled person’s trust is a specialist provision that requires careful drafting. If you have a disabled loved one, make sure your will properly provides for them without jeopardising their benefits. WillSafe’s specialist will kits come with detailed guidance.
Get the Will Kit →Related guides
- Discretionary trust in a will UK
- Life interest trust in a will UK
- Trust for bereaved minors UK
- Inheritance tax threshold UK 2026
- What is a will trust UK?