Providing for a vulnerable beneficiary under your Will can be difficult and requires careful consideration.
What is a vulnerable beneficiary?
There is no legislative definition for a vulnerable beneficiary. Examples of a vulnerable beneficiary would include:
- a beneficiary under the age of 18 years
- a young adult beneficiary that may lack maturity to manage a large inheritance
- an adult beneficiary with some intellectual impairment
- an adult beneficiary with a physical impairment
- an adult beneficiary with a psychological disorder
- an adult that suffers from a problematic dependency or addiction
What estate planning strategies can be implemented where there is a vulnerable beneficiary?
The most common method of providing for a vulnerable beneficiary is by a protected trust. Generally, under this type of trust, the beneficiary does not have a say in how the income or capital is distributed. The appointed trustee will have the discretion to use the income and capital for the benefit of the named beneficiary. This would include payment of the named beneficiary’s expenses. Upon the termination of the trust (such as when the named beneficiary dies), the remaining income and capital of the trust will be distributed in accordance with the Will.
Some issues that should be considered, include:
- whether the trust should be tailored to allow the beneficiary an appropriate level of control over their finances. For example, the level of control over the trust given to a beneficiary may change as they get older.
- whether adequate provision has been given to a vulnerable beneficiary.
- who should be appointed as the executor and trustee under your Will (e.g. family member, lawyer or a licensed trustee etc.).
If you have any questions in relation to the above, please contact our team of Lawyers at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.