For parents of vulnerable or Special Educational Needs (SEN) children, making a will is crucial. Some of these children won’t be able to manage money themselves and they may be at risk of being taken advantage of for their inheritance.
Very often parents have fought for years to get their child the right benefits and support structure that they need. Inheriting money could cause all of that to be taken away and any means tested benefits could be stopped.
Very often people think that children only need protecting until they become adults but this is not always the case.
Making a will
Making a will is not only about who’ll benefit from an estate but also how.
The use of trusts within wills can solve a lot of problems when there’s a vulnerable child involved.
Trusts are greats ways to ensure that money can be used for the benefit of a child but that they are also protected.
Two types of trusts
There are two types of trusts often used. Below is a summary of each.
This type of trust is very flexible and is the most common type of trust when people want an extra layer of protection to ensure children don’t just receive assets at a specified age.
A discretionary trust holds all or some of the estate assets and it relies on trustees and beneficiaries.
The trustees control the assets within the trust and can apply those assets for the benefit of any or all of the beneficiaries.
Naming someone as a beneficiary doesn’t give them any right to benefit from the assets within the trust. The assets within the trust are not counted towards any mean tested benefits assessment.
The trustees unanimously make a decision at a particular time about who (from the named beneficiaries) will benefit from the assets within the trust and when. If the assets aren’t paid out of the trust they can stay within the trust structure.
This type of trust can be used to protect children who aren’t very good with money and where children are vulnerable.
It is an excellent mechanism to ensure children can have funds made available to them if they need them, but that they aren’t in control of those funds themselves and their benefits aren’t affected.
Disabled Persons Trust
This type of trust also protects funds for the benefit of vulnerable children by ensuring they don’t have control over the assets and that their means tested benefits aren’t affected.
However, they can’t be used for all vulnerable children.
To use this type of trust the primary beneficiary of the trust has to be classed as disabled.
What is classed as disabled for this purpose is defined in legislation. Essentially this definition encompasses someone who’s incapable of managing their property and financial affairs, and/or would (or does) qualify for attendance allowance, disability living allowance or PIP at certain rates.
If this type of trust is set up the funds within the trust have to be used for the benefit of the disabled person and cannot, during the disabled person’s lifetime be used for anyone else (subject to a current minimum of £3,000 or 3% of the fund per year, whichever is lower).
This type of trust isn’t as flexible as a discretionary trust and the funds couldn’t be used for the benefit of other children or family members if the disabled person did not need them.
The benefit to this type of trust over a discretionary trust where there is more flexibility, is tax. As soon as the disabled beneficiary has passed away, other children or family members can benefit from the trust but the trust then also becomes subject to the same tax regime as a standard discretionary trust.
Lasting Power of Attorney
As well as having a will and setting up a trust, there is also a Lasting Power of Attorney that can be used to assist with vulnerable or SEN family members.
How our Wills, Probate and Trusts Team can help
Our Wills, Trusts and Probate experts can help you plan for the future and protect vulnerable or SEN children/ family members and advise on what is best to fit your circumstances.
Contact them today on 01772 799 600.
Article by Zoe Fleming