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- Benefits from the Benefits Agency could be stopped and entitlement to Local Authority funding could be stopped. Therefore your loved one's inheritance will be of no real advantage to them.
- A Receiver from the Court of Protection is likely to be appointed to manage the affairs of the disabled person. This can be very expensive and may not act as you or the disabled person may want them to.
- The estate will be subject to a much harsher tax treatment.
HOW CAN A DISABLED PERSONS’ DISCRETIONARY TRUST HELP YOU?
If you include this trust within your will it will place the amount you wish to give to your loved one into a controlled settlement rather than leaving it directly to them (in their name). You will nominate at least two trusted people (trustees) known to you giving them the responsibility to make the financial decisions.
ADVANTAGES
- The amount that you leave your loved one does not go directly to them (in their name); this means that the benefits they are receiving are not adjusted or stopped as this money is not taken into account when looking at what that disabled person owns.
- Trustees have full discretion in applying the income/capital for the benefit of the disabled person; this means the Court of Protection won’t need to appoint a Receiver to manage their affairs as the Trustees will be doing this through the Trust.
- There is no tax charge on payments for the benefit of the disabled person! This includes anniversary and exit charges.
- You can leave a Letter of Wishes to the Trustees to explain why you have set up the Trust and what you would like to achieve including explanations as to what the money should be spent on.
- Trustees have discretion; which means that they can adjust to deal with the affairs of the disabled person and his/her changing circumstances e.g. money required for the payment of medical bills.
- The Trustees also have the ability to adapt to a change in legislation that we cannot predict.
- The Trust enables you to give the Trustees the ability to give your family member the best possible care and to make arrangements for their future so their lives can be enhanced and the quality can be maintained.
Who is classed as disabled?
According to the HMRC website a disabled person is ‘someone who, because of a mental disorder, is not capable of managing their own affairs or administering their own property OR someone who is in receipt of attendance allowance or a disability allowance because they are entitled to the care component at the higher or middle rate.’.
Trustees?
This can be the hardest decision. These people are made legally responsible for the property within the Trust left for the benefit of your disabled child. The trustees will be people who are aware of the needs of the disabled child and will have the responsibility of administering the trust.
It is recommended that these trustees be people who are close to the disabled person, perhaps brothers or sisters, so that they know their specific needs and are close by to administer the Trust as and when the disabled beneficiary requires it.
Trustees will be able to:
- ‘drip feed’ money to the disabled person;
- take them on holidays and pay for luxuries, etc.
The disabled person will not lose entitlement to benefits.
Do you have a family member who you care for who is mentally/physically handicapped? If so, your care for him/her is hugely important and the question needs to be considered - what will happen when you are no longer around?
If you have a disabled loved one, it could have a disastrous effect if you simply leave them a large amount of money after your death.
DISABLED CHILD?
