Andrew Jack of AMD Solicitors discusses the best way to protect the interests of a beneficiary under your Will with a disability or learning difficulty.
Recently I was consulted by parents who had a son on the Autistic Spectrum. Although he is still young, as are they, they had done the responsible thing of planning for the future so their son was protected should the worse happen.
They did not have a large estate but were aware that should they leave a proportion to him absolutely he would not be able to cope with that amount of money and he would be vulnerable to people taking financial advantage of him.
There was also the risk that a sizeable inheritance would affect any benefits he would be entitled to in the future.
I discussed with the parents two of the most important matters they should take into consideration as parents of a disabled child. Who would look after their son if they were not here and who would look after money for him if he was not capable of looking after it himself.
Whilst everyone can appoint guardians under their Will for a disabled/vulnerable beneficiary you can extend guardianship to express the wish that the guardian is also responsible when the vulnerable beneficiary becomes an adult. This can help with deputyship applications in later life.
To protect the money left to a vulnerable beneficiary the best option is to establish a trust.
There is a form of trust specifically for disabled beneficiaries. This has a favourable tax regime but offers no flexibility. All income is payable to the disabled beneficiary and this can impact on benefits entitlement and put them at risk of people taking financial advantage of them.
The most common type of trust is a discretionary trust. Under this type of trust it is usual to include the whole estate within the trust and have what is known as a class of beneficiaries, these are commonly children, grandchildren and other family members who can benefit at the discretion of the trustees
The trust can either be established on your death or in your life time trust (if it is needed to receive assets already held in trust e.g. death in service benefits). The trust fund is looked after by trustees who are often the executors (they need to be at least two in number, and often include a professional) with distributions of both income and capital made at the trustees discretion. The powers given to the Trustees give them the flexibility to apply funds to benefit a disabled beneficiary so that they can consider entitlement to benefits and ability to cope and all individual circumstances before making a distribution. The choice of trustees is crucial given the wide powers they have over the Trust fund.
The trust can be accompanied by a letter of wishes, which give guidance to your trustees as to the distribution of funds.
There are some tax implications to this type of trust but the flexibility available usually outweighs any tax disadvantages but of course this does depend on each individual’s circumstances
Andrew and his colleagues offer a free check of all wills to ensure their accuracy and suitability and a free discussion of your needs. Contact Andrew on 0117 9898518 or email andrewjack@amdsolicitors
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