Since 1976, Mencap Trust Company has enabled parents, grandparents and others to set up over 2,000 trusts for their loved ones who have a learning disability. Each trust fund is used to provide things that will make a difference to the lives of these individuals.
We constantly monitor how each trust is being used and face-to-face review meetings are at the heart of our service. These help build relationships so that our beneficiaries, and the important people in their lives, are confident about asking for funds.
What is a discretionary trust?
A trust is a way of looking after property or money so that it can help a person who is not able to look after the assets for themselves.
A discretionary trust is a special form of trust which gives all the decisions about how the assets are looked after and how they are used, to named trustees.
Unlike many other trusts, wealth left or accumulated in a fully discretionary trust does not affect the beneficiary's eligibility for means-tested benefits or entitlements.
Julie Schwarz, director of Mencap Trust Company, talks about the benefits of using a discretionary trust service and the way that they work in this video.
Read our answers to frequently asked questions about setting up a trust.
Why should I set up a Trust?
If a person has more than £16,000 they lose their eligibility for means-tested benefits. Losing means-tested benefits can also mean losing a support package that has been carefully built up over the course of someone’s life. Once the money is spent and the person is eligible for means-tested benefits again, this support package must be renegotiated — often from scratch.
A discretionary trust protects against this, while safeguarding vulnerable individuals who might have come in to a significant capital sum from financial abuse.
What is a letter of wishes?
A letter of wishes sits alongside the trust deed. It often includes information about your loved one’s interests and preferences, and family connections. It guides trustee decisions, but is not legally binding.
How do I set up a Trust?
Mencap Trust Company can act as the trustee of an individual trust you set up with the company. We will work with the beneficiary's family and supporters, and will put the wishes and best interests of the beneficiary at the heart of our decisions.
- Set up a standard trust with MTC with an initial amount of £5. The charge for setting up the trust is £250 plus VAT.
- You will leave the trust a further sum of money under the terms of your will – we recommend that you see a practising solicitor and make a new will.
- On your death, money will be paid to the trustees and trust will be activated.
- Tell others about the trust you have set up, and consider making a lifetime settlement.
What and who is a Trustee?
A trustee is the person or body responsible for the assets (which might include money and/or property) held in trust. Together, Mencap Trust Company’s six voluntary directors act as the sole trustee of all of our trusts, and carefully decide how each each trust fund is managed, and spent.
How does a discretionary trust work?
The Trust Company accepts responsibility and has complete discretion for all decisions affecting the use and investment of funds. The beneficiary does not have an automatic entitlement to trust funds. For this reason the trust cannot impact on means tested benefits and entitlements. The Trust Company holds the assets in trust, to maintain and manage throughout the beneficiary’s life.
Would you recommend a Disabled Persons Trust?
A Disabled persons trust (DPT) is available to qualifying beneficiaries. It offers potential tax advantages but also reduces the powers to the trustee. Only you can judge if a DPT is the best choice for your family. You will need expert advice to decide this. Mencap Trust Company offers a standard discretionary trust and a Disabled Persons Trust.
Would you recommend setting up a Disabled Persons Trust?
Families tend to think that because their loved one is disabled, and because there is a special and tax efficient trust called a Disabled Persons Trust, it must be the right choice for them. But it isn’t that simple, and has to be thought through for each family scenario.
A Disabled Persons Trust offers potential tax advantages along with less flexibility for trustee decisions. The savings in tax depend on the size of the taxable estate and the value of the trust fund, as well as how long the fund is likely to run for, and how it will be managed and used. And the impact of the lost flexibility depends on the unknowable future.
While we are offering a DPT option we will not recommend it specifically, and will always tell potential settlors to talk through all their options with experienced and qualified professionals. We will only accept DPTs from solicitors.
We want other family members to act as trustee and use Mencap Trust Company, of this doesn't work out. Can we do this?
The most important thing about a trust is that you choose the people you trust to act as trustee. Often this is younger family and friends, and this is good – Mencap Trust Company is not right for everyone.
Sometimes settlors want to name Mencap Trust Company as a substitute trustee should their first choice of trustee decide not to act, or decide to retire. Like all trust companies, Mencap Trust Company must follow a due diligence process before taking over a trust. We can only take over trusts were it is clear that the trust has been well run and has fully complied with trust and tax laws. So it is important that settlors understand that there is no guarantee that Mencap Trust Company will agree to a request to take over as trustee at a point in the future.
Will you help me complete the paperwork?
Yes. Your first step is to talk to your solicitor about our service. If you then choose us we will guide you through the paperwork, and confirm that the trust deed is sealed and safely stored. Every two years we will check your details are up-to-date. When the time comes we will help the beneficiary and the people important in his or her life to access the trust.
Should I add funds to the trust during my life time?
Making a gift to the trust during your lifetime, is called a lifetime settlement.
A lifetime settlement gives parents the opportunity to see the Trust Company in action, and allows them to help their loved one learn how to use the trust well. We have seen how the death of a parent can end the way of life the beneficiary knew, particularly when living in the family home. A lifetime settlement ensures we have resources to support your loved one straight away. Your solicitor can advise on other ways of providing cash for the period between death and granting of probate.
I have a pension. Can that be placed in trust?
You can ask your Pension Trustee to put any remaining pension into a discretionary trust payable to a vulnerable dependent.
How do the review meetings work?
These are structured but informal interviews with the beneficiary and their supporters. Each is an opportunity to discuss health, lifestyle, financial position, ambitions and challenges. The beneficiary receives a report which they and their supporter check and sign off. Review meetings are held every 1 to 3 years depending on the value of the trust. They are also scheduled when important changes happen in the beneficiary’s life such as moving home.
How does the beneficiary ask for money from the trust?
There is no limit on the number of times a trust can be accessed. Requests can be e-mailed or posted, often after talking through details with us on the phone. A straightforward request can be approved immediately. Other requests are referred to our volunteer directors. If a request is refused this is explained and an alternative is often reached.
When is a trust ‘wound-up’?
When the primary beneficiary passes away any remaining funds are distributed as specified by the settlor in the original trust deed. Residuary beneficiaries may be siblings, friends and even charities. If no one is named then Royal Mencap Society receives the balance.
What is a lifetime settlement?
A gift put into the trust during your lifetime gives you the opportunity to see Mencap Trust Company in action, and allows you to help your loved one learn how to use the trust well.
The death of a parent can end the way of life the beneficiary knew, particularly when living in the family home. A lifetime settlement ensures we have resources to support your loved one straight away. The granting of probate can take months and the execution of the Will can take more than a year.
Your solicitor can advise on other ways of providing cash for the period between death and granting of probate.
Contact the Mencap Trust Company team
Call us on 020 7696 6932 or email email@example.com if you have a question we haven't answered yet.Find out who the team is