We understand it can be incredibly difficult to look ahead to a time when you will no longer be able to support your child. Putting in place appropriate mechanisms to provide them with the help they need is crucial. Alison Craggs, partner specialising in wills and trusts, explores what families in this situation need to know.
There are a number of risks to leaving money outright to a child with a learning disability in your Will. If you leave money to your child outright, it could lead to loss of any means-tested benefits they receive, which means inherited money will then be spent on things that the state would have funded. When the inherited money runs out, your child will have to reapply for benefits – a stressful process which may not be successful. In some cases, a deputy might need to be appointed to manage your child’s finances, which can be an added complication. Finally, in a scenario where a child receives a large sum of money outright, they run the risk they will be taken advantage of.
An alternative approach is to consider a discretionary trust in your Will. Rather than leave money outright, it is possible to set up a discretionary trust in your Will. This approach will ensure your child’s financial future is protected. You will need to decide who the executors and trustees are, and you can provide them with guidance as to how you want your child to be supported by way of a ‘letter of wishes’. It is worth knowing that if you have no one you feel you can appoint as a trustee, certain charities, for example Mencap, can be appointed as a trustee. Money from the trust can be used to purchase things for your child’s benefit (for example a holiday) without the money having to be paid to your child outright. Funds could also be used to benefit charities that have supported your child. The trust can hold property, savings, investment or other assets.
What if you also have other children? If there are also other children to consider, it is possible to divide your estate between them, and the discretionary trust which benefits the child with a learning disability who needs support. Alternatively, your entire estate can be put into the trust. The latter offers more flexibility, especially if you plan to have more children.
How can I give money to my child during my lifetime? If you have sufficient means, you can set up a trust in your lifetime. This might be appropriate for example if your child is able to live independently and you would like to buy them a house; you could do this through a trust, so it does not belong to your child outright.
You should look at putting in place Lasting Powers of Attorney for yourselves, and perhaps also your child if he or she is over 18 and has capacity to do so.
Some families consider leaving money intended for the care of a child with a learning disability to another family member – but this can be fraught with unforeseen difficulties, for example, if the family member dies before your child; divorces; becomes unable to manage their finances; or declared bankrupt, then the money could be lost. Relationships can also change over time and the family member could fall out with your child and decide not to benefit them.
None of these questions are easy, and we are happy to talk through how best you can provide for your family when you are no longer here to look after them. Please contact Alison Craggs at firstname.lastname@example.org.
The charity Mencap also provides a range of resources which are a useful starting point.