Planning for the future when you have family members with disabilities is key to ensuring that the arrangements you make do provide for them as you intend, and don't unintentionally leave your loved ones with an administrative nightmare or, in some circumstances, worse off financially.
Most of us want to leave our assets to our children or other close family upon our death. However, what if your child or sibling has a disability that limits their ability to manage their own finances? This is where the importance of thinking through all the implications of your will, and having a proper conversation with a qualified solicitor to discuss all the ramifications is crucial to provide for your family in a practical way and ensure your peace of mind.
Your Will
Whilst you can provide for your family under your will by way of a monetary gift or percentage of your estate, it may be beneficial to consider other provisions if you are concerned about a beneficiary's mental capacity.
It may be tempting to leave money to a friend or family member in the expectation that they use it for the benefit of the vulnerable family member .However there are obvious downsides to this such as the recipient not using the money as is originally intended, the recipient dying prematurely and the funds forming part of their estate, or the recipient divorcing and the funds forming part of a financial settlement to a former spouse.
You may also be concerned about your child's entitlement to benefits if they were to receive a lump sum of money upon your death. Any money they receive outright will be offset against their entitlement to means tested disability benefits and means tested social care services, which can often lead to an inheritance being swallowed up by living costs and care costs which were previously met by the state. This can mean that an inheritance does not actually leave a recipient any better off.
To avoid the risk to your child being unable to manage their finances, the risk of passing the responsibility of dealing with their finances to friends or family and the risk of them no longer being entitled to means tested benefits, it is wise to consider providing for them via a trust.
There are multiple types of trusts can be used to help provide for your child and other beneficiaries.
Discretionary Trust
This would be a flexible way for trustees, whom you can appoint in your Will, to decide how to manage the funds at their discretion. There is no set amount that needs to be given at any time but instead it is up to the trustees to decide how the beneficiaries should benefit. As this type of trust means that there is no set entitlement for your child, they would not be considered to 'own' a certain amount of money so their means-tested benefits would not be affected.
This type of trust is also helpful, as it allows for your trustees to determine what is necessary for your child depending on their circumstances and this can be useful if your child has needs that are likely to change over time.
Trust for a Disabled Person
This is another type of trust where the beneficiary is consider disabled under the legal definition – this could be applicable for your child if they lack the mental capacity to manage their own financial affairs due to a learning disability or a mental health condition and this includes people who are entitled to attendance allow or disability living allowance at either the medium or higher rate.
This is also a type of discretionary trust however your child would be named as the principal beneficiary during their lifetime. This means that they will receive at least 50% of the capital paid out of the trust and the income.
This trust also allows your child to avoid any trust assets being considered for means tested benefits and can in some situations be have tax advantages due to special tax treatment rules for this particular type of trust.
If may be that both types of trusts are suitable for your child's future, so it is important to consider the inheritance tax implications when including these in your Will. As can be seen from the above, this is a complex area, with many options that may be suitable, so it is important to seek legal advice when considering making or changing your will.
Deputyships
Having looked briefly at arrangements for our money after we're gone, it's worth mentioning the issue of how we can support adult family members who are not able to make decisions about their property and finances due to cognitive difficulties which mean they lack the mental capacity to make the necessary decisions.
It's relatively straightforward for the parents of a child under 18 to support them with their finances. However, parents of an adult with disabilities are not automatically entitled to deal with their financial affairs.
The Department for Work and Pensions will usually allow a parent to continue to act as "appointee" for their adult offspring's benefits which means that they can claim, and spend on their behalf, any disability related benefits to which their child is entitled.
For young adults who have more complex finances or, for example, need to take up a tenancy in a supported living scheme, they may need a Deputy for Property & Affairs. This involves making an application to the Court of the Protection for the appointment of one or more suitable people – the Deputy or Deputies – to manage financial issues and make decisions about property and finances based on the best interests of the adult.
Another frequent trigger for making an application for deputyship is an inheritance, where the testator has not established a trust. Bearing in mind that the process of making a Court application can be lengthy and involves paying court fees and arranging for an independent expert to assess mental capacity, it's always best, if the need for support to manage an inheritance is anticipated, to deal with this issue when drafting the will by establishing one or more of the types of trust outlined earlier.
At Clapham & Collinge we have a dedicated team of experts who are able to provide you with all the necessary information, support and legal advice relating to claims for provisions for family and dependents. Our legal advice is bespoke, confidential, and designed around you, helping you reach the best outcome.
If you would like to seek advice on Wills, Trusts, Probate, Lasting Powers of Attorney or any other private client related matter, please contact our dedicated Client Relations team on 01603 693510, or email enquiries@clapham-collinge.co.uk.
This article is provided for general information purposes only and does not constitute legal advice or professional advice.
