The impact of a vulnerable beneficiary on an estate plan

People suffer vulnerabilities in many different forms, and when it comes to estate planning, it is essential to consider how to address the unique needs of a vulnerable beneficiary.

This vulnerability can vary from somebody with a mental or physical impairment to functioning beneficiaries who may display dysfunctional behaviour, impacted either by drug or alcohol addiction or the propensity to mismanage or abuse money that comes into their hands; ie spendthrifts.

Another form of vulnerability is a beneficiary who is likely to suffer from a relationship breakdown that might erode a gift from an estate. This is where a testamentary trust becomes an essential protective feature of a client's estate plan, and it is a vulnerability that impacts about 64% of the Australian population.


In any case, an adviser needs to consider what protection should be built into the estate plan to ensure that any future inheritance is not squandered or lost by any vulnerability. This is where a more restricted testamentary trust can become an important part of an estate plan.

For beneficiaries who are incapable of managing any wealth, a trust that transfers control to a trusted third person may be appropriate. Protected trusts or restricted testamentary trusts are suitable for persons in this category and are designed to restrict a beneficiary's access to the capital and income of the trust that is created from their share of an estate.

A less restricted trust may give a beneficiary control to the income of the trust but not the capital or, perhaps, limited access to capital.

Identifying the beneficiary's mental, physical, behavioural or social habits and what protection should be put in place for their future welfare is just one of the investigatory features of the Inherit legal bot. The bot does the work in helping an adviser identify the special needs of a beneficiary that the Inherit panel lawyer addresses.