Future Planning For Children With Disabilities And Additional Needs

It’s easy for life to get busy and become hectic and with that comes the temptation of focusing on the here and now and losing sight of the future. Despite this being important, it’s also crucial to plan ahead – what if we lose a loved one? What if they lose mental capacity? We refer to this process as “Estate Planning”. As surprising as it may seem, it can be a positive experience, giving you reassurance that you have done as much as you possibly can to set your loved ones up for a secure future.

In this article, we set out our five top tips on how to make the most of the Estate Planning process, especially when you need to provide for a child or other relative who has a disability or other additional needs (such as those which may result from an HIE event).  

Top Tip 1: Prepare a Will 

Recent surveys suggest that between 50% and 60% of UK adults don’t have a Will, despite consequences of not having a Will being significant. 

Without a Will, you’re relying on the Rules of Intestacy – laws which determine which members of your family tree inherit from you. Relying on these laws is very risky as it may include exclusion of unmarried partners and limited protection for spouses and children, especially those with special needs.

It’s crucial to select a reputable Will provider in the UK as there’s no legal requirement for them to have any relevant qualifications or experience. There have been recent examples of unscrupulous companies acting incompetently or even dishonestly. To avoid this, you should choose those who are regulated and insured, like solicitors or financial professionals. Consider individuals affiliated with STEP, a professional body for anyone involved in this area of law which requires qualifications in trust and estate law. 

Finally, Wills should be reviewed regularly to ensure they remain in line with your current wishes, and that they remain effective following any changes to legislation or taxes. 

Top Tip 2: Consider creating a Trust Fund in your Will 

A Trust Fund, in simple terms, is just an arrangement where you transfer funds to someone (a Trustee) which they then control for your chosen beneficiaries in accordance with terms set out by you. It’s a way of separating who controls an asset from who benefits from it. 

Various Trust Funds exist with distinct functions and tax implications, including a "Disabled Person's Trust" with unique tax benefits. However, it’s not one-size-fits-all for every disabled individual. It’s therefore important to seek legal advice to choose the right Trust Fund for your specific situation. 

Trustees should be chosen carefully. You must trust them as you will be giving them a lot of responsibility and power to implement your wishes. You can appoint professional trustees where you’re not comfortable appointing friends and family in the role. 

Creating a Trust Fund in your Will for a disabled loved one is crucial, as it offers more flexibility than relying on an Attorney or Deputy, who face restrictions on the person's assets. A Trust Fund allows you to dictate the terms and guide trustees with a Letter of Wishes and means you can maintain some control and influence over how the funds are used even after your death - after all, you will know your loved one best, and this is your way to pass on your knowledge and understanding of what’s important to them. 

A challenge for parents with disabled children is how to balance the needs of the disabled child with your children who don’t have additional needs. Ensuring fairness among your children whilst addressing a disabled child's unique financial needs is complex due to uncertain future finances and state support. A Trust Fund for all your children can offer a fair solution, allowing flexibility in distributing assets based on each child's needs and circumstances at the time of your passing.

It's also important to note that using a Trust Fund can safeguard a disabled person's means-tested benefits, which could be at risk if they inherit directly. It's essential to set up the Trust Fund in advance, as benefits may not be protected if the person tries to transfer the funds to a Trust Fund themselves after your death, it’s unlikely to protect their benefits entitlement.  

Top Tip 3: Plan for Inheritance Tax and Care Fees 

Inheritance Tax won’t affect most people, but for those who it does, it can significantly reduce the value of the estate. To maximise what you pass on, especially to loved ones with additional needs, early estate planning is crucial. Strategies include gifting, creating trusts, structuring Wills, and exploring financial options like life insurance and tax-efficient investments. Combining legal and financial advice is key to finding the best approach for your situation.

Top Tip 4: Consider what will happen to your Pension and Death in Service payments 

If you are (or were) in employment, you have may a private pension or Death in Service benefits. Be aware that your Will doesn’t dictate who receives these funds; pension scheme trustees do, based on your beneficiary nominations. It's important to regularly update these nominations to reflect your current wishes for the distribution of these benefits upon your death. 

To ensure your pension and death in service benefits support a disabled beneficiary via a Trust Fund, set up the Trust while you're alive and nominate them as the beneficiary of these funds. This prevents direct inheritance, which your Will can't control. Consolidate your assets by directing your estate to this Trust in your Will and seek professional advice to ensure this strategy fits your unique situation. 

For your pension, consider retaining it to provide ongoing income to beneficiaries after your death. You may benefit from taking financial planning advice regarding the options for your pension and to assess if such income might impact a disabled person's means-tested benefits. If so, directing a lump sum into a Trust Fund could be a preferable alternative.

Top Tip 5: Create Lasting Powers of Attorney (LPAs) 

As a caregiver to a disabled person, it’s vital to plan what would happen if you lost capacity to manage your own affairs, not just theirs. Creating Lasting Powers of Attorney (LPAs) early allows you to choose who will handle your affairs and you can provide some instructions and guidance in the LPA documents to guide your Attorneys on how you would like them to use their powers.  

There are two types of LPA – one that appoints someone to make decisions about your property and finances, and another that appoints someone to make decisions about your health and welfare. 

If you support a disabled dependent, an LPA for finances is crucial to ensure care continues if you lose capacity. Your Attorneys have a strict remit to look after your own interests, so it can be challenging for them to use your funds to provide for others even where you had done so before you lost mental capacity. Therefore, it’s critical to consider how to address this and give clear guidance in the LPA documents. 

When drafting an LPA, carefully decide how your Attorneys should weigh your financial needs against those of a disabled dependent, such as in scenarios of limited funds for care. Seek professional advice to ensure your LPA reflects these preferences accurately.

Contact:

Everyone’s circumstances are unique, and the tips highlighted in this article are by no means an exhaustive list of all the things to consider.

Getting personalised professional help and advice is very important. Irwin Mitchell can assist with the legal and financial planning issues raised and if you have any questions you would like to discuss around Wills, Trusts and Estates Planning or information on Financial Planning and Wealth Management you can visit our website. 

Alternatively, Rob can be contacted directly by email.