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Trusts

Disabled Person's Trusts Explained

A disabled person's trust holds money or property for someone who is disabled or vulnerable, with trustees managing it and special tax treatment where the rules are met.

10 min read · Written by the Fairchild Oldfield team · Last reviewed: July 2026

£3,000
For a disabled person's trust set up on or after 8 April 2013, all payments must generally go to the disabled person, except up to £3,000 a year (or 3% of the assets, if lower) that may be used for someone else.
Source: gov.uk, trusts for vulnerable people, as at July 2026, subject to change.

A disabled person's trust is a trust set up mainly for the benefit of someone who is disabled or vulnerable, where trustees hold and manage the assets and, provided the conditions are met, the trust receives special tax treatment (gov.uk, trusts for vulnerable people, as at July 2026, subject to change).

These trusts are one way families try to provide for a disabled child, partner or relative for the long term, without handing over money the person may find hard to manage or that could affect other support. This guide explains what the trust is, who counts as a disabled person, how the money can be used, and the tax rules. It sits alongside our wider Trusts Explained guide. Figures are current as at July 2026 and subject to change.

What is a disabled person's trust?

A disabled person's trust is a trust whose main beneficiary is a person who is disabled or, in some cases, a bereaved minor. Trustees hold the assets and decide how they are used within the trust terms, and where the trust qualifies it is taxed differently from an ordinary discretionary trust (gov.uk, as at July 2026, subject to change). HMRC calls this group trusts for vulnerable people. It sits apart from ordinary discretionary trusts, which are taxed under different rules. It is a mainstream, long-standing way to provide for a vulnerable relative.

Who counts as a disabled person?

A disabled person for these rules is, broadly, someone eligible for certain disability benefits, whether or not they actually receive them. The list includes Personal Independence Payment, Attendance Allowance, and Disability Living Allowance where they get the care component at the highest or middle rate, or the mobility component at the higher rate (gov.uk, trusts for vulnerable people, as at July 2026, subject to change). A child under 18 whose parent has died can also qualify as a vulnerable beneficiary.

  • Personal Independence Payment (PIP). Eligibility for PIP is one of the qualifying routes.
  • Attendance Allowance. Eligibility can bring an adult within the definition.
  • Disability Living Allowance. At the highest or middle care rate, or the higher mobility rate.
  • Bereaved minor. A child under 18 who has lost a parent may also count.

Eligibility, not receipt, is the test for the disability benefits above (gov.uk, as at July 2026, subject to change). The full list of qualifying benefits is on gov.uk.

How the money is used

How a disabled person's trust works

Trustees look after the assets and apply them for the disabled person, following both the trust deed and the tax rules. For a trust set up on or after 8 April 2013, all payments must generally go to the disabled person, except up to £3,000 a year, or 3% of the assets if that is lower, which may be used for someone else (gov.uk, trusts for vulnerable people, as at July 2026, subject to change). Older trusts follow different limits.

Trusts set up before 8 April 2013 instead needed at least half of the payments made during the disabled person's lifetime to go to that person (gov.uk, as at July 2026, subject to change). Getting these conditions right matters, because they decide whether the trust keeps its special tax status.

The right structure depends on the family and the assets, so many people discuss it with a qualified professional. For the wider picture, see our Trusts Explained guide.

Payments to others

£3,000

On a disabled person's trust set up on or after 8 April 2013, up to £3,000 a year, or 3% of the assets if lower, may be applied for someone other than the disabled person without losing the special treatment (gov.uk, as at July 2026, subject to change).

How is a disabled person's trust taxed?

The aim of the rules is to tax a qualifying disabled person's trust roughly as if the income and gains belonged to the disabled person, which is often kinder than the flat rates for ordinary trusts. Trustees claim this by making a Vulnerable Person Election, so that income tax and capital gains tax are worked out by reference to the disabled person's own position (gov.uk, trusts for vulnerable people, as at July 2026, subject to change).

TaxTreatment where the trust qualifies
Income TaxTrustees may claim a reduction so tax reflects what the disabled person would pay if the income were theirs, via a Vulnerable Person Election.
Capital Gains TaxA higher tax-free allowance can apply for a vulnerable beneficiary, and gains can be reduced to the beneficiary's level.
Inheritance TaxThe disabled person is generally treated as beneficially entitled, so assets form part of their estate rather than facing the usual trust charges.

For the 2026 to 2027 tax year the capital gains tax-free allowance for trusts is £1,500, but £3,000 if the beneficiary is vulnerable (gov.uk, trusts and capital gains tax, as at July 2026, subject to change). Income tax is claimed on a Vulnerable Person Election (gov.uk, as at July 2026, subject to change).

Inheritance tax and the disabled person's estate. Unlike most discretionary trusts, a qualifying disabled person's trust generally does not face the periodic and exit charges that apply to relevant property trusts. Instead the disabled person is treated as having a deemed interest in possession, so the trust assets are treated as part of their own estate for inheritance tax, subject to the normal reliefs and exemptions on death or when the interest ends (gov.uk, IHT manual IHTM42805, as at July 2026, subject to change). The ordinary nil-rate band of £325,000 per person then applies to that estate in the usual way (gov.uk, inheritance tax, as at July 2026, subject to change). This is general information, and every trust is different.

A common reason to use one

Trusts and means-tested support

One reason families consider this route is the interaction with benefits and later-life care, though the effect depends on the trust and the person's circumstances.

A well-drafted disabled person's trust is often used so that a vulnerable relative can be provided for without an outright lump sum that they may struggle to manage or that could affect means-tested support. How assets held in trust are treated for benefits and for a local-authority care assessment is a detailed area, and it depends on the type of trust and the facts, so it is one option some consider only after taking advice (gov.uk, apply for a needs assessment, as at July 2026, subject to change).

It is also worth being clear about care fees. Local authorities can look at whether assets have been deliberately given away to reduce what someone pays for care, under the deprivation of assets rules, and such transfers can be challenged (gov.uk, paying for your care, as at July 2026, subject to change). A disabled person's trust is a way of providing for a vulnerable person, not a device for deliberately avoiding care fees, and any planning around limiting the impact of care fees is best discussed with a suitably qualified professional before anything is done.

A worked example (illustration only). Parents want to provide for an adult son who receives Personal Independence Payment and cannot manage a large sum himself. Rather than leave him £200,000 outright in their wills, they set up a disabled person's trust for him, with his sister and an adviser as trustees. Because he is eligible for a qualifying benefit, the trust can qualify as a disabled person's trust (gov.uk, as at July 2026, subject to change). On a trust set up on or after 8 April 2013, payments generally go to him, with up to £3,000 a year (or 3% of assets, if lower) available for others (gov.uk, as at July 2026, subject to change). Whether this suits any real family depends on their circumstances, so this is general information rather than advice.

How do you set up a disabled person's trust?

A disabled person's trust is usually created either in a will, taking effect on death, or as a lifetime trust, and the trust document needs to be drafted so that it meets the qualifying conditions. Because the tax status and benefit treatment turn on the wording, this is an area where many people take professional advice rather than use a template. The main steps below are a general outline, not a set of instructions for any particular family.

  1. Confirm eligibility. Check that the intended beneficiary meets the disabled person definition, for example through eligibility for a qualifying benefit (gov.uk, as at July 2026, subject to change).
  2. Choose trustees. Pick people you trust to manage the assets in the disabled person's interests.
  3. Draft the trust. Have the deed or will trust drafted to meet the qualifying conditions, so the special treatment can apply.
  4. Register where required. Many trusts must be registered with HMRC's Trust Registration Service (gov.uk, register a trust, as at July 2026, subject to change).
  5. Make the tax election. Trustees can make a Vulnerable Person Election so the favourable income and gains treatment applies (gov.uk, as at July 2026, subject to change).

A life policy, investment bond or pension is sometimes written alongside a trust of this kind. Those are regulated products with their own rules, so anyone considering them can speak to an FCA-authorised financial adviser. See how trusts sit within the bigger picture in our estate planning guide.

Disabled person's trusts in Scotland and Northern Ireland

The tax rules for trusts for vulnerable people are set by HMRC and apply across the UK, so the income tax, capital gains tax and inheritance tax treatment described here is UK-wide (gov.uk, as at July 2026, subject to change). What differs is the surrounding law. Scotland has its own trust and succession law, and Northern Ireland has a separate but broadly similar system to England and Wales. Where a trust or estate touches more than one UK nation, it can be worth taking advice in each. For the wider context, see our Trusts Explained guide.

Frequently asked questions

What is a disabled person's trust?

It is a trust set up mainly for a person who is disabled or vulnerable, where trustees hold and apply the assets for them. Where the qualifying conditions are met, HMRC gives it special treatment as a trust for a vulnerable person, so income, gains and inheritance tax are handled more favourably than in an ordinary discretionary trust (gov.uk, as at July 2026, subject to change).

Who counts as a disabled person for these trusts?

Broadly, someone eligible for certain disability benefits, whether or not they receive them, such as Personal Independence Payment, Attendance Allowance, or Disability Living Allowance at the highest or middle care rate or higher mobility rate (gov.uk, as at July 2026, subject to change). A child under 18 whose parent has died can also be a vulnerable beneficiary. The full list is on gov.uk.

How is a disabled person's trust taxed?

Where it qualifies, tax is worked out roughly as if the income and gains were the disabled person's own, which is often lower than ordinary trust rates. Trustees make a Vulnerable Person Election, and a higher capital gains tax allowance can apply. For 2026 to 2027 the trust allowance is £1,500, but £3,000 for a vulnerable beneficiary (gov.uk, as at July 2026, subject to change).

Does a disabled person's trust avoid inheritance tax?

It does not remove inheritance tax, but it is treated differently. A qualifying disabled person's trust generally avoids the periodic and exit charges on ordinary trusts, because the disabled person is treated as beneficially entitled and the assets form part of their estate instead (gov.uk, IHTM42805, as at July 2026, subject to change). The usual nil-rate band and reliefs then apply to that estate.

Can a disabled person's trust affect means-tested benefits?

It can, but the effect depends on the type of trust and the person's circumstances. One common reason families use this structure is to provide for a vulnerable relative without an outright sum that could affect support. How trust assets are treated for benefits and care assessments is detailed, so many people take advice before setting one up (gov.uk, as at July 2026, subject to change).

Can I use a trust to avoid paying care fees?

No structure should be used to deliberately avoid care fees. Local authorities can review whether assets were given away to reduce care costs under the deprivation of assets rules, and such transfers can be challenged (gov.uk, paying for your care, as at July 2026, subject to change). A disabled person's trust is a way of providing for a vulnerable person. Any planning around limiting the impact of care fees is best discussed with a qualified professional first.

How do you set up a disabled person's trust?

It is usually created in a will or as a lifetime trust, drafted so it meets the qualifying conditions, with trustees appointed and the trust registered where required (gov.uk, register a trust, as at July 2026, subject to change). Because the tax and benefit treatment turns on the wording, many people take professional advice rather than use a template, and trustees can make a Vulnerable Person Election.

About Fairchild Oldfield

The Fairchild Oldfield team brings together estate planning, tax, independent financial advice and client care, working with families across England and Wales.

Fairchild Oldfield are estate planning specialists and will writers, not a firm of solicitors. This article is general information based on practical experience, not legal, tax or financial advice.

Important: This article is general information only and is not legal, tax or financial advice. Reading it does not create a professional relationship. It is based on the law of England and Wales, and other UK jurisdictions may differ. Figures and rules are current as at July 2026 and are subject to change. Before acting, many people choose to seek advice from a suitably qualified professional, such as a solicitor, a STEP practitioner, an accountant, or an FCA-authorised financial adviser, who can consider your individual circumstances.

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