If you are the parent of a vulnerable child, it is perfectly understandable that you will want to ensure that they are provided for and looked after well even when you are no longer around to oversee their care.
The best way to ensure that this happens, and indeed to have all your wishes abided by, is to leave a will. However, as James Woods in our private client team in Heathfield, East Sussex explains, leaving a lump sum for your vulnerable child to inherit directly may not be appropriate and other avenues should be explored.
If you die without leaving a will, the strict rules of intestacy apply and although your child will inherit part of the estate, this may not be the amount you want or in a form that is desirable.
There are a number of reasons why you might not want to leave a lump sum to a vulnerable beneficiary to inherit directly. It might affect any means-tested benefits they currently receive, or they may not be mentally capable of looking after their financial affairs. It also leaves them open to being taken advantage of financially by unscrupulous family or friends.
Leaving a sum to a relative with the understanding that this money is to be used solely for your disabled child, may seem like an easy option. However, this course of action carries risk, as the bequest would effectively become the relative’s and they would not be legally obliged to spend it on your child. In addition, the money would form part of their estate and would not automatically go to your child if they die, divorce or go bankrupt.
A better tactic is to set up a trust within the will to which you can direct the amount you want to leave to your child on your death. A vulnerable person’s trust would allow you to name in writing the people you want to manage the trust on behalf of your vulnerable child and outline the exact way you want the money to be used. They would act as trustees and be responsible for safeguarding the inheritance.
This type of trust ensures that your child – who would be named as the principal beneficiary – will receive any capital and income paid out of the trust, but provides some flexibility and discretion to the trustees to allow your child to be properly looked after as their needs evolve. It will allow your child to keep any means-tested disability benefits they receive and also enables you to specify what happens to the trust fund should your child pass away.
To eradicate any possible ambiguity or confusion among your chosen trustees, you could include a letter of wishes alongside your will, outlining why you have set the trust up and how you would like the money to be used.
There are certain criteria that need to be satisfied for the trust to attract special tax treatment. This would ensure that the amount of tax charged on income and gains arising would be no more than it would have been had the income and gains arisen directly to the vulnerable person.
It is also possible to set up a trust in your lifetime outside the terms of your will to protect a vulnerable child.
How a solicitor can help
If you want to ensure that a vulnerable child is left financially stable after you pass away, you should speak to one of our lawyers who specialise in wills and trusts. They will ensure that your will is legally binding and can set up the trust within the will, as well as help you draft an appropriate letter of wishes, to ensure that your wishes are clearly communicated and understood.
For further information on making a will, please contact James Woods in our private client team in Heathfield, East Sussex on 01435 890 101 or email jameswoods@hugheslaw.co.uk.
This article is for general information purposes only and does not constitute legal or professional advice. Please note that the law may have changed since the date this article was published.