Wills and inheritance
Providing for the future of your child is one of the most important considerations for a parent, it starts before your child is born and you will need to think about their future, especially when you are no longer there to support them. Writing a Will gives some control over how they will get the financial support they need, through any money or assets left as an inheritance.
This information is intended as an outline of the different schemes that can be implemented in your Will. It is not intended to be exhaustive and is not a substitute for you seeking more detailed professional advice in light of your own personal circumstance.
Schemes that could be included in your Will:
Provision for your child is made without any further directions or restrictions in the will. Things to consider:
- Does your child have the capacity to make decisions as to the use of the money
- As this will form part of their estate, will they be able to make a will
- The capital and any income from this would be taken into account in assessing a person’s entitlement to means-tested benefits.
This is the same as the absolute gift scheme except that day to day use of the inheritance would be in the hands of trustees whom you have appointed. This scheme may be appropriate in the situation where the value of the inheritance is relatively small. Things to consider:
- Trustees are governed by Trust Law which places certain obligations upon them, such as to prepare accounts for the money and property they look after and to pay tax that is due. Trustees may charge for this service.
The share of the inheritance (capital) allocated to your child with disabilities is invested by the trustees so that the income from the investment belongs to your child. The capital is ultimately ear marked in your will for other individuals e.g. your other children or grandchildren. This scheme runs for the lifetime of your child and on their death the capital is allocated in accordance with the terms of your will. Things to consider:
- The income is taken into account in assessing a person’s entitlement to means-tested benefits but the capital is not
- Your child may be better off from an income point of view, if the income from the investment exceeds any projected means-tested income.
This is the same as the Life Interest Trust scheme but some of the investment capital, ear-marked for other beneficiaries, may be used for a one-off payment if your child with disabilities has a particular need. The terms in your will can place restrictions on how much capital can be used in this way and for what purposes.
The share of the inheritance (capital) allocated to your child with disabilities is placed into the hands of the trustees who then have total discretion on how to allocate the income and capital for the benefit of your child. There will be more than one beneficiary who would be able to benefit from any of the income and capital and you would name them in your will, these other beneficiaries could be your other children, grandchildren or organisations such as charities. During the lifetime of your child with disabilities the trustees decide how the income and capital is spent, so none of this may be allocated to your child, or all of it may ultimately be spent on them. On the death of the child any remaining capital and unused income is distributed in accordance with the terms of your will or left to the discretion of the trustees. Things to consider:
- None of the capital or income is taken into account in assessing a person’s entitlement to means-tested benefits
- You are placing total reliance on your chosen trustees to manage the trust as you would have wanted it
- There are likely to be income tax and capital gains tax consequences, depending upon how the capital is invested and used
- A letter that guides the trustees as to your wishes may be beneficial
You could leave all of your inheritance to other family members on the basis that they will give money or provide a gift to your child with disabilities from time to time, as they feel it is appropriate. Things to consider:
- There are no constraints on the decisions made by the people you have left the inheritance to and ultimately you are trusting them to act in the best interest of your child with disabilities. This may not always be possible, for example, they may have financial difficulties or go through a divorce, resulting in the inheritance being “lost” through bankruptcy or in a divorce settlement.
- If you leave your child with disabilities entirely out of your will a potential claim against your will could be made by your child or on their behalf under the Inheritance (Provision for Family and Dependants) Act 1975
- Scope – provides information and an advice line
- Mencap – provides a Wills and Trust service for parents who have a child with a learning disability
- The Law Society – The independent professional body for solicitors
- The Society of Trust and Estate Practitioners – Professional body for trust and estate practitioners