You can set up trust funds from the proceeds of public subscriptions to benefit those who are permanently and totally incapacitated. ("Permanently incapacitated" means the beneficiary of the fund is totally and permanently unable to maintain themselves as a result of physical or mental infirmity. Their incapacity may have occurred as the result of an accident, illness, progressive disorder or similar disability.)
Sometimes following an accident, illness, etc. the family, friends or colleagues of someone who is or has become permanently incapacitated may run some events to help raise money for the benefit of the disabled or incapacitated person. The money that is then raised from these events, may be held in trust for the permanently incapacitated individual and used for their benefit throughout their life. For example, funds may be used to pay for health treatment, a holiday, specialised equipment or a carer for the beneficiary.
Under Section 12 of the Finance Act 1999, certain trust funds established for the benefit of this person may be exempt from income tax.
A trust is a legally enforceable (agreement) that is established between the trustees of the fund and the beneficiary or beneficiaries. The trustees are the administrators (or custodians) of the fund and their role is to maintain and operate the assets of the trust for the benefit of the beneficieries. The beneficiary (or beneficiaries), is the permanently incapacitated person who benefits from the funds raised on their behalf. Trustees cannot have any connection with the beneficiary. (In other words, they cannot be family members or spouses of the beneficiary. They must remain independent and objective in decisions arising from the operation of the trust to ensure they act in the best interest of the beneficiary).
Funds raised from public subscriptions generally mean monies raised from a public appeal or a charitable event. To avail of the tax exemptions, the trust must be set up under specific conditions as follows:
Trust funds set up for the benefit of a permanently incapacitated person(s) allow both the trustees and the incapacitated individual(s) to avail of certain tax exemptions. The following is a summary of the tax exemptions:
The incapacitated person or persons receiving income and the trustees must declare this income to the Revenue Commissioners when making their annual tax returns. When a claim is first made for a tax exemption, the following documention is required:
Setting up a trust fund has complex legal implications. It is important therefore to seek the advice of a qualified legal professional (for example, a solicitor). In addition, it is very important to discuss the tax implications with an accountant and the Revenue Commissioners.
It is also possible to obtain tax relief for payments made to incapacited individuals, through a deeds of covenant. Tax relief for payments made to incapacitated individuals can also be obtained through the investment income from personal injuries awards. More information is available about Personal Injury Compensation Payments and tax relief (pdf).
If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 8pm) or you can visit your local Citizens Information Centre.