How can I provide for my disabled child after my death?

If you have a disabled child, then it is important to consider how you will provide for them after your death.  Should you die intestate (without a will), then your child will automatically benefit from your estate, and it may not be the case that they can manage their own finances.  Leaving money directly to your child could also leave them open to financial abuse from others.

Instead of making an absolute gift of money directly to your disabled child, it is preferable to leave the sum in trust, appointing trustees who you can rely on to provide for your child from the trust fund after your death.  Your trustees would most commonly be a trusted family member, but could also be a professional trustee such as a law firm, who have the expertise in administering the trust correctly.

It would be recommended that you leave a letter of wishes with your will, which gives you the opportunity to make your views known as to how you would like the trustees to use the trust for the benefit of your child.

You should also consider appointing guardians in your will, whose appointment will only become effective if both parents were to die before your child reaches the age of 18.  We usually advise against leaving money directly to your chosen guardians (or to anyone else for that matter) with an expression of a wish to care for your child; such an expression is not binding on them, and they may use the money for other purposes if they wanted to.

Disabled trusts are created favourably for inheritance tax purposes. Instead of being subject to an immediate charge to tax if created during the lifetime of the settlor (as opposed to in the will upon death), the creation of a disabled person’s trust is treated as a “potentially exempt transfer”, meaning that there will be no charge to inheritance tax if the settlor survives seven years of creating the trust. The trust will also not be subject to the usual 10 yearly anniversary charges or exit charges that affect other forms of trust.

An alternative would be to set up a life interest trust effective upon your death, to benefit your child during their lifetime with a power for your trustees to appoint a certain amount of capital to your child should they require it.  Upon their death, the funds would pass to another named beneficiary.

If you need any assistance with setting up a will or forming a trust, do not hesitate to contact Laura Sentkovsky or anyone in the Private Client team at Meaby & Co.

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