Financial planning for your disabled child

Most parents worry about what will happen to their children if they die.

However, as a parent or carer to a disabled child the question ‘What happens when I die?’ takes on a whole new meaning. Tackling how your child may manage financially without you is a good first step to safeguarding their future and giving you peace of mind.

You may have heard of a Disabled Person’s Trust, but many parents are often confused about putting the right plans in place. It can be difficult to decide whether these special trusts are the right choice for them and their family. My Family, Our Needs has teamed up with Renaissance Legal to set out the key points you need to know.

Why set up a Trust?

A Trust is a financial arrangement which ensures that your assets (property, savings or investments) are held by trusted individuals (known as Trustees). These are set up for the benefit of your selected individuals (known as the beneficiary or beneficiaries).

Putting a Trust in place can give you peace of mind that the assets you’re leaving behind for your disabled child can be managed appropriately, for their benefit throughout their lifetime.

Trustees decide how to use the assets for the benefit of your child. The decisions they take are guided by the Trust document and Letter of Wishes; which you provide ahead of time.

Your child’s means-tested benefits and funding are also protected by the Trust, this ensures they are not financially vulnerable. According to Mencap, even a lump-sum inheritance as small as £6,000 can affect your child’s benefit entitlements in the future.

What is a Disabled Person’s Trust?

This type of Trust can only be set up to benefit someone who is disabled or vulnerable. Additionally, they must meet certain criteria, for most people, this would mean they are in receipt of:

  • Attendance Allowance
  • Disability Living Allowance at the middle or high rate for care
  • or the higher rate for mobility or Personal Independence Payment.

Trustees are in control of how the Trust will be administered. As a result, they decide how to specifically support your child. A Disabled Person’s Trust can have significant tax advantages over other types of Trust. The tax rules are complex and need careful consideration, but in many cases, the taxes paid in this Trust can be minimal.

Who benefits from the Trust?

With this kind of Trust, Trustees can use the capital or income for the benefit of your child and it is at their discretion as to how this is done. Trustee Guidance on how you would like them to provide for your child is provided in the form of a Letter of Wishes. Trustees have flexibility in how they make provision for your child, which means that plans can be tailored to meet your child’s needs as they change.

Choosing your Trustees

When setting up a Trust, one of the hardest decisions to make is choosing your Trustees. It is an extremely important decision as the people you choose will be responsible for managing the Trust and making important decisions that will affect your child. It can take time to think through your options and come to a decision but it is necessary to do this to ensure your Trust is run as you would like it to.

A person must be over 18 to be a Trustee and they must be someone that you feel is responsible enough to carry out your wishes and ensure that all decisions are made for the benefit of the beneficiaries. The Trustee can be a family member, a friend or a professional person. It is also possible to appoint a Trust Company to act as a Trustee.

Is a Disabled Person’s Trust right for my child?

When deciding if a Disabled Person’s Trust is suitable, there are a number of factors that need to be considered, such as:

  • The age of your child.
  • Nature and the long-term prognosis of their disability.
  • The value and type of assets you wish to place in the Trust.
  • The needs of your child.
  • Logistics, such as where your child may live, who will care for them, and how this will be funded.
  • The needs of other family members.

Useful Links:

Renaissance Legal
Specialists in working with families and carers of disabled children and helping them plan effectively for the future.

Mencap Will and Trusts – all you need to know
A downloadable guide exploring the difference between Wills and Trusts.