Providing for Children and others with Learning Difficulties
If you have a child with learning difficulties providing for them in your will can be a huge worry. Let us take an example of a couple who have three children Tom, Dick and Harry. Harry has learning difficulties. How do they provide for him?
The default approach would be to divide the estate three ways. But this causes problems:
- assuming Harry does not have the capacity to manage his affairs on the couple’s death a deputy would have to be appointed to manage the inheritance. This would be an expensive and slow process.
- there is also the worry that as a vulnerable adult, someone could take advantage of Harry for his money.
- assuming Harry is on means tested benefits these would come to an end on the couple’s death as the capital received from the inheritance would probably take him above the required capital limits.
As an alternative they could choose to leave him nothing at all. Leave the estate to Tom and Dick on the understanding that they will look after him. But this is not satisfactory.
- What if either of the sons fall out with Harry.
- What if one of them has financial difficulties or becomes divorced, a third party would have a claim against Harry’s inheritance.
- What if one of them dies and the Inland Revenue tries to tax Harry’s inheritance as part of the estate of the deceased sibling.
A much more sensible approach is to set up a trust for Harry in the will. You need to choose the right trustees to manage it. The inheritance would be ringfenced and Harry would receive payments from the trust but at the same time making sure his own capital does not go above the capital limits for means tested benefits. That way he will not lose his benefits. At the same time the trust prevents the need of applying for a Deputyship order. With the right persons acting as trustees, it minimises the risk of Harry being exploited.
A Lifetime Trust
An even better approach is for the couple to set up the trust in their lifetime. They can then place moneys into the trust. As long as they are not beneficiaries this can save them Inheritance Tax on their death. Other family members can also add to the trust either in their lifetime or in their own wills.
A properly drafted trust can go a long way towards providing protection for those family members with special needs and give reassurance for the parents or carers concerned.
If you would like to know more about how trusts can work for you why not come to one of my free seminars or contact me for an appointment.
