The term ‘disabled persons trust’ is frequently used to describe any trust where a beneficiary is deemed vulnerable or disabled. It is not a specific type of trust.

A disabled persons trust can be any discretionary, interest-in-possession or absolute trust. The key is whether the beneficiary’s vulnerability qualifies the trust for income and capital gains tax (CGT) relief or if their disability qualifies the trust for special inheritance tax (IHT) treatment.

So, who qualifies as a vulnerable or disabled beneficiary?

Vulnerable only:

• A child under 18 where at least one parent has died – known as a ‘relevant minor’

Vulnerable and disabled:

• A person with a mental health condition covered by the Mental Health Act 1983
• A disabled person who is eligiblefor any of the following benefits (even if they’re not receiving them): adult disability payment; armed forces independence payment; attendance allowance; child disability payment; constant attendance allowance; disability living allowance (for adults or children); industrial injuries disablement benefit; personal independence payment.

Income tax and CGT relief

Trusts with a vulnerable beneficiary can make a ‘vulnerable beneficiary election’ with HM Revenue & Customs, allowing them to qualify for income tax and CGT relief.

Where the trust has a liability to income or CGT, they may be eligible for a deduction. This is calculated as follows:

1. Trustees calculate the trust’s tax liability – using the trust rates of tax and assuming no relief
2. Trustees then calculate the tax liability the vulnerable person would have on the same income/capital gains if taxed at their marginal rate.
3. The trustees claim the difference between these two figures as a deduction on their tax liability.

The relief only applies if it is the trust which is liable to the tax.  For example, a discretionary trust in receipt of interest and dividends. Absolute trusts place the income tax and capital gains liability on the beneficiary directly, so the relief is not necessary.

Higher CGT exemption

Trusts eligible for the vulnerable beneficiary election will have a higher CGT annual exempt amount. This is currently £3,000 (2024/25, usually £1,500), though this allowance may be reduced where the settlor has created multiple trusts.

Trusts which hold investment bonds

Bonds are taxed under chargeable event rules, chargeable gains are tax as income. Under these rules, the settlor of a discretionary or interest in possession trust is liable to income tax on gains arising during their lifetime or tax year of their death. The trustees only have a liability in the following tax years. Even then, the bond can be assigned directly to a beneficiary to be taxed at their marginal rate. Therefore, it may not be necessary for the trustees to make the vulnerable beneficiary election.

If the trust has multiple beneficiaries

If there are beneficiaries who do not qualify as vulnerable, the trustees must segregate assets held for them. The relief only applies for the portion of the trust fund held for the vulnerable beneficiary.

If there is more than one vulnerable beneficiary, the trustees must make an election for each.

Claiming the relief

Trustees must first submit a vulnerable beneficiary election form (VPE1) to HMRC. If there is more than one vulnerable beneficiary, one form must be submitted for each.

Trustees claim the income tax and CGT relief when submitting their annual self-assessment (SA900). Self-assessment must be completed by 31 January following the end of the tax year.

The relief ends on the death of the vulnerable beneficiary, or if they cease to qualify.

Calculating the relief can be complicated, so trustees should consider engaging an accountant. Example calculations are also available from HMRC.

Inheritance tax

A trust may receive special IHT treatment where one of the following applies:

• One or more beneficiary is disabled or has a condition which is expected to make them disabled.
• The trust is a ‘bereaved minors’ trust. This is where one or more of the beneficiary’s parents has died creating a trust in their will (or via the rules of intestacy) for their minor child.

The following special treatment is applied:

• A gift to a disabled persons trust is a potentially exempt transfer regardless of the type of trust used. This means there will be no 20% entry charge for exceeding the nil rate band.
• Trusts will not be subject to the 10-yearly periodic or exit charges.

Restrictions on the trust fund

To qualify, there are restrictions which must be followed:

• For trusts created before 8 April 2013, at least half of the payments from the trust must go to the disabled person during their lifetime.
• For trusts created on or after 8 April 2013, all payments must go to the disabled person. However, up to £3,000 per year (or 3% of the trust’s value, if lower) can be paid to other beneficiaries.
• Trusts of bereaved minors (trusts created by the will of the child’s parent) must pay all assets to the beneficiary on attaining age 18 or before.

While it is possible to use an ‘off the shelf’ draft trust deed, a settlor of a disabled persons trust may choose instead to instruct a legal adviser to draft a bespoke trust document which enforces these restrictions on the trustees.

On death of the beneficiary

Any part of the trust fund held for a disabled beneficiary is treated as part of their estate for the purposes of calculating their IHT liability.

Claiming the special treatment

There is no election or application required for the treatment to apply. However, trustees and settlors are advised to keep good records which can help them demonstrate that the special treatment applies if needed.

Means-tested benefits

A settlor looking to create a trust for a disabled or vulnerable person is likely to be keen not to disrupt any entitlement to means tested benefits. These are benefits where an individual’s capital and income are used to assess whether they are entitled to a benefit and how much they might receive.

Bare trust

Any assets held in a bare trust will be considered for any means-tested benefits the beneficiary claims. This is because the beneficiary has a vested right in the trust fund. There is one notable exception to this; capital and income are excluded from means testing if the trust settled with the award of a personal injury claim for the beneficiary of the trust. The trust must be settled within 12 months of the award.

Discretionary trust

Any assets held within a discretionary trust are not usually considered for means tested benefits as no beneficiary has a vested right in the trust fund. However, any capital or income paid to the beneficiary will be considered in the assessment.

In either case, the position is unchanged if a beneficiary qualifies as a vulnerable or disabled person.

 Trust registration

Trusts for disabled beneficiaries or bereaved minors are exempted from registration during the lifetime of the disabled beneficiary. If the trust ceases to qualify for special treatment the trustees must register the trust within 90 days.

Disabled persons trusts:

*Rate applicable to trusts: Income Tax 39.35% (dividend) 45% (all other income). 0% on all income if below £500. Capital Gains 20% annual exempt amount up to £1,500) 2024/25

**Assuming the trust fund is applied for the vulnerable beneficiary.

Rachael Griffin is a tax and financial planning expert at Quilter

OVER a quarter of a million households have had their benefit payments stopped after failing to act on a key deadline.

New government figures show 318,834 (up from 284,660 reported in August) benefits claimants have lost out by not moving to Universal Credit within an important three-month window.

Two million people on legacy benefits are gradually moving to Universal Credit under a process known as managed migration.

Universal Credit was set up to replace legacy benefits and kicked off in November 2022 after a successful pilot in July 2019.

As part of the process, eligible households on legacy benefits, including tax credits, are sent “migration notices” in the post which tell them how to make the move to Universal Credit as it’s not automatic.

Households must apply for Universal Credit within three months of receiving their managed migration letter.

Failing to do this can result in benefits being stopped.

Between July 2022 and September 30, 2024, the Department for Work and Pensions (DWP) sent almost 1.4 million migration notices.

However, according to the DWP’s latest figures, 318,834 individuals lost their benefits after failing to act on migration notices received between July 2022 and June 2024.

Some 883,944 individuals have since made successful claims for Universal Credit, and another 166,594 are still in the process of transitioning.

Ayla Ozmen, director of policy and campaigns at Z2K, said: “We’re concerned to see that more people have had vital benefit payments stopped as part of the government’s plan to move people on to Universal Credit.

“The government now looks to have moved all disabled people on to Universal Credit by March 2026, and we are worried that more people may miss the deadline and have their benefits stopped, with potentially disastrous results.

“The government needs to ensure that appropriate safeguards are put in place to stop disabled people being left with nothing to live on.”

Experts have previously warned that managed migration poses a risk to vulnerable people who face losing money.

Top bosses at charities, including Mind, The Trussell Trust, Turn2Us and the Money and Mental Health Policy Institute, said in 2022 that around 700,000 with mental health problems, learning disabilities, and dementia could struggle to engage with the process.

More than 20 organisations have called on the government to halt managed migration to fix flaws in the system that could cause those at risk to fall through.

MANAGED MIGRATION PROGRESS

In January, the government announced the number of migration notices it plans to send out in the coming financial year.

Before this date, the focus was sending migration notices to households claiming tax credits only.

However, 110,000 income support claimants and a further 120,000 claiming tax credits with housing benefit started receiving their letters in April.

Over 100,000 housing benefit-only claimants were contacted in June.

More than 90,000 people claiming employment and support allowance (ESA) along with child tax credits started being asked to switch in July.

Meanwhile, 20,000 claimants on jobseekers allowance (JSA) were contacted in September.

The Sun previously reported that, in August, those claiming tax credits who are over state pension age will be asked to apply for either Universal Credit or pension credit.

It was initially planned that those claiming income-related ESA alone would not be moved until 2028.

However, the DWP brought forward plans to move these households to Universal Credit by the end of 2025.

Since September 2024, 800,000 households have begun receiving letters explaining how to move from ESA to Universal Credit.

HELP CLAIMING UNIVERSAL CREDIT

As well as benefit calculators, anyone moving from tax credits to Universal Credit can find help in a number of ways.

You can visit your local Jobcentre by searching at find-your-nearest-jobcentre.dwp.gov.uk/.

There’s also a free service called Help to Claim from Citizen’s Advice:

• England: 0800 144 8 444
• Scotland: 0800 023 2581
• Wales: 08000 241 220

You can also get help online from advisers at citizensadvice.org.uk/about-us/contact-us/contact-us/help-to-claim/.

Mortgage Mayhem: Jessica Simpson and Eric Johnson’s $22M Loans Amid Money Troubles and Rumored Split

Jessica Simpson and her husband, former NFL star Eric Johnson, have taken out over $22 million in loans on their opulent Hidden Hills mansion, raising questions about the couple’s finances and sparking rumors of a potential split after a decade of marriage. Despite the whispers of financial struggles and relationship troubles, the two have not publicly confirmed any separation or filed for divorce.

jessicasimpson – Instagram

Property records reveal a complex series of financial maneuvers on the home, which Simpson purchased in 2013 from Ozzy and Sharon Osbourne for $11.5 million under her “Dixie Trail Trust.” Initially, in 2015, Simpson and Johnson took out a $7.3 million mortgage on the property with JPMorgan Chase, followed by an $8 million loan in 2017. Additional loans with other lenders — $3.65 million with Platinum Loan Servicing Inc. and $3.04 million with the Bank of Southern California — brought the total loan amount to over $22 million. Although they have continued to meet these loan obligations, the sheer scale of the debt has fueled speculation about the couple’s financial standing.

An Oasis of Luxury in Hidden Hills

Simpson and Johnson’s estate in the celebrity-favored, gated community of Hidden Hills is a stunning example of luxury California real estate. This 13,274-square-foot home, nestled on 2.25 acres of land, boasts an impressive eight bedrooms and 13 bathrooms. Blending Cape Cod-inspired design with contemporary elegance, the home is secluded at the end of a cul-de-sac, offering both privacy and sweeping views of the city and nearby mountains.

The house is built for both entertaining and family life, featuring a grand spiral staircase that makes a memorable first impression. A large family room is warmed by a reclaimed brick fireplace and framed by oversized sliding barn doors, giving the space a rustic, yet refined look. Floor-to-ceiling windows flood the space with natural light, creating a sense of openness and connection to the outdoors.

jessicasimpson – Instagram

The kitchen is truly a chef’s dream, with high-end Wolf appliances, a spacious center island, a walk-in pantry, and a charming breakfast nook where Simpson has shared glimpses of cozy family mornings with her children, Maxwell, Ace, and Birdie. The master suite is a luxurious retreat within the home, complete with a fireplace, a wood-paneled walk-in closet, and an adjacent office for quiet moments or remote work. Outdoor spaces add to the estate’s allure, with expansive lawns, a spa, a shallow pool, and numerous seating areas designed for lounging, socializing, and relaxation. A separate guesthouse provides additional living space, suitable for an office or gym, and a four-car garage adds a practical touch.

Financial Struggles and the Fight to Save Her Brand

Simpson’s financial challenges have become public knowledge over the years, with the singer and entrepreneur candidly discussing her journey to reclaim control of the Jessica Simpson Collection, the billion-dollar brand she co-founded with her mother, Tina, in 2005. The business grew rapidly, becoming a household name and a major force in fashion retail. However, in 2015, Sequential Brands Group acquired a controlling stake in the business, leaving Simpson with a 37.5% ownership share.

In 2021, when Sequential Brands filed for bankruptcy, Simpson was forced to make a difficult decision. Determined to regain full control of her company, she and her mother placed a $65 million bid, a move funded by a mix of loans and family contributions. “I drained everything to buy it back,” Simpson revealed in an interview, explaining the extent of her financial commitment to the business. Her decision meant taking on significant personal financial risk, even to the point of not having a working credit card at one point. “I went to Taco Bell the other day and my card got denied,” she admitted on The Real, highlighting her willingness to prioritize her brand’s future over her own financial comfort.

For Simpson, the choice to regain control of her brand was deeply personal. “With money, there’s just so much fear attached to it,” she said, acknowledging the anxiety that can come with financial instability. Despite these struggles, Simpson has remained resolute, regularly showcasing pieces from her collection on social media and discussing her plans to expand the brand further.

jessicasimpson – Instagram

Rumors of a Rocky Marriage and Separate Lives

Alongside these financial hurdles, Jessica and Eric’s relationship has faced scrutiny, with rumors circulating that the couple may be living separate lives. The two celebrated their 10-year wedding anniversary this year, but Simpson’s failure to acknowledge the milestone on social media fueled speculation about the state of their marriage. Observers noted that she has been spotted without her wedding ring in recent months, and Eric has been noticeably absent from her social media posts. Even during recent family gatherings, such as Easter, the couple appeared together with their children but did not pose side-by-side.

Jessica’s recent post from her Nashville music room, where she announced new music, further hinted at personal challenges. She wrote, “This comeback is personal, it’s an apology to myself for putting up with everything I did not deserve,” a statement that many fans interpreted as a veiled reference to her marriage. Her return to music seems to be both a professional and personal endeavor, a chance for Simpson to reconnect with her passions and redefine herself after years of business and family commitments.

Looking to the Future with Resilience and Renewal

Though Jessica and Eric put their Hidden Hills mansion on the market for $22 million in September 2023, they later removed the listing in August 2024. This move leaves questions about their future — will they remain in Los Angeles, or could they be considering a more permanent move to Nashville, where Simpson has been spending more time and working on new music?

Despite the rumors and financial strains, Simpson’s determination remains clear. She’s shown a fierce commitment to her brand, her family, and her own personal growth. Reflecting on her drive and resilience, she once shared, “I’ll put it all out there if it’s me that’s driving the show, because I believe in myself… And I know that nothing will stop me, and if you try to stop me, I’ll try harder.”

jessicasimpson – Instagram

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Her journey has been anything but conventional, marked by financial gambles, a high-profile marriage, and a struggle to maintain her footing in a demanding industry. Simpson’s story is one of both public and private battles, of a woman unafraid to push her limits in pursuit of a vision that’s entirely her own. As she embarks on her latest “personal comeback,” fans and critics alike are watching closely, anticipating what the next chapter holds for the multi-talented star.

AJ Bell has reduced ongoing charges across its multi-asset income range, including flagship funds.

The charges for the VT AJ Bell Income Fund and VT AJ Bell Income & Growth Fund have been reduced by 15 basis points.

The reduction from 0.65% to 0.50% came into effect on 1 November.

AJ Bell said its multi-asset income range has delivered strong performance with a five-year total return of 22.51% and 27.58% respectively.

The funds, which were launched in 2019, will now offer a smoothed income profile, with 11 equal monthly income payments and a final balance distribution in month 12.

The wealth manager said the multi-asset income range, alongside its Managed Portfolio Service (MPS), Growth and Responsible investing funds, has formed an important part of its investments business.

The investments business has grown to assets under management of £6.8 bn as of 30 September 2024, up 45% in the year and with inflows of £1.5 bn.

AJ Bell said today’s announcement further evidences its commitment to delivering exceptional value for customers and follows charge reductions on its Investcentre adviser platform earlier this year, with fees cut to between 0.2% and 0.075% and capped on accounts over £2m.

Ryan Hughes, AJ Bell Investments managing director, said: “After another strong year for our investments business, we are very happy to announce a reduction in charges for our range of income funds. We remain committed to passing on economies of scale to our customers as we continue to grow, ensuring we are delivering excellent value investment solutions alongside strong investment returns.

“At the same time, the move to a ‘smoothed income’ approach helps customers using our income funds manage their investment income. As more investors look to rely on investment income in retirement, this approach will make life easier, with a consistent, reliable income enabling better budgeting and cashflow planning.”

THE government is set to announce huge plans to create “pension megafunds” in a bid to boost both savers’ retirement pots and investment in the UK.

Chancellor Rachel Reeves will outline the plans to move around £800billion of pension savings into larger so-called “megafunds” in her first annual “Mansion House” speech this evening.

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Local government pension schemes, which manage around £400billion of that cash, will be forced to split into eight megafunds.

Eventually, the plan is to then group all other defined contribution (DC) schemes – what most workers save into – into a number of other big funds.

DC schemes are where you and your employer both put money into a scheme and the cash is invested to grow your pot over time.

The plan is to set a minimum amount these funds can have in them – currently touted as somewhere between £25billion and £50billion.

The government is also consulting on allowing fund managers – who manage where all this cash is invested – to move savers from schemes which are under-performing into schemes that will deliver them better value.

The megafund set-up is similar to the pension systems in other countries like Australia and Canada, where pension cash is pooled into huge so-called “superfunds” and invested on behalf of larger groups of savers.

Ms Reeves said the reforms are the biggest change to the pensions market “in decades” that will “boost people’s savings in retirement” and “drive economic growth”.

The government added: “Consolidating the assets into a handful of megafunds run by professional fund managers will allow them to invest more in assets like infrastructure, supporting economic growth and local investment.”

What do the changes mean for your money?

Currently, most workers in the UK are automatically enrolled into their workplace pension scheme.

These are usually DC schemes. The other type of pensions in the UK are “defined benefit” schemes, where workers receive a guaranteed income in retirement based on their years of service.

But “megafunds” will pool a number of workplace pension schemes together to create giant pots of money to invest.

The aim is that by having much larger amounts to invest, the cash returns on those investments will be far higher than having lots of smaller pots.

For example, if you returned 5% on £1,000 in a year, you would earn £50, but if you returned 5% on £100,000 over a year, you would earn £5,000, and so on.

This should mean savers should end up with much larger pots of money by the time they retire.

Having more cash also means investment managers can take more risk with their investments with the aim of achieving higher returns.

Looking at the bigger picture, the government is hoping that these larger pension funds can be used to invest in infrastructure projects, which will ultimately benefit everyone.

Currently, most DC pensions in the UK are too small to invest in any meaningful capacity in infrastructure projects, such as roads, railways or building developments.

But government analysis has found pension funds worth between £25billion and £50billion can achieve much greater “productive investment levels”.

For example, it found Canada’s pension schemes invest around four times more in infrastructure than the UK currently does, while Australia’s pension schemes invest around three times more.

By combining UK schemes, the government estimates it could unlock a whopping £80billion to invest in the country’s infrastructure.

Jon Greer, head of retirement policy at wealth manager Quilter, said that by pooling resources into larger funds, savers will access “high-yield investments that smaller schemes often miss”.

“Drawing inspiration from successful models in Australia and Canada, this approach has the potential to deliver stable returns while supporting meaningful long-term projects,” he added.

However, some pensions industry experts have expressed concern that the government’s main focus is on investing in the UK rather than achieving returns for savers.

Tom Selby, director of public policy at AJ Bell, warned: “Conflating a government goal of driving investment in the UK and people’s retirement outcomes brings a danger because the risks are all taken with members’ money. 

“If it goes well, everyone can celebrate – but it’s clearly possible that it will go the other way, so there needs to be some caution in this push to use other people’s money to drive economic growth.”