24th May 2016 Me
If you are a parent or carer of a young person with additional needs, have you given any thought to long-term plans for their future? If you’re just getting through day to day life, it may not feel like something you are able to think about just yet. However, planning for their future by setting up a will or trust can take away some of the worry of what the future may bring. Nigel Cullen sets out some of what you need to know about the importance of setting up a will or trust to protect your child’s future.
What is a will?
A will is a legal document that outlines what you would like to happen to your things when you die. This could be your property, money or even things you own. It is possible to draft a will using online templates; stationers also provide Will packs. However, there are risks of not getting the wording right or not dealing with the strict signing and witnessing requirements correctly. As such it really is advisable to consult a solicitor. The job generally only takes a few hours and is relatively inexpensive. Alternatively, ‘Will Weeks’ are advertised each year around March and October when participating solicitors will draft up wills in exchange for a donation to charity.
Anyone dealing with instructions about writing a will needs to be told about the type of property to be given away, where it is and the intended beneficiaries. If you later sell a particular item you have said that you originally wanted to gift to a friend then, of course, this gift will default. If the property mentioned in your will is not in your possession when you die, then it is obviously not there to be given away. Similarly, if after you have made a will you buy or come into property then this may need specific mention, so you should remember to review your will from time to time.
Why should I have a will?
It is important to set up a will because, if you die without having one, a process called intestacy will have to be followed by Law. The Law related to intestacy decides who will receive your property after your death. This may mean that loved ones and charities you wanted to benefit will not receive anything from your estate.
If you don’t write a will, under the Inheritance and Trustees’ Powers Act 2014 if you are married and have children then your property will be divided as follows:
- All jointly owned property will pass to the surviving joint owner (as has always been the case).
If you have property held exclusively in your own name then:
- A surviving spouse or civil partner will receive a legacy worth up to £250,000i and personal belongings, but not property used solely or mainly for business purposes as well as those held solely as an investment.
Anything left over (the remainder of your estate) will be divided:
- 50% to the surviving spouse/civil partner and
- 50% to any of your children upon them reaching the age of 18.
There are other aspects that you may need to consider, including the rights of your partner if you are co-habiting. Always seek professional advice to make sure your will can be followed as you intend.
Frankly, if you want your loved ones to be provided for as you wish – making a will is recommended. Around two-thirds of the population do not have wills. Gain peace of mind and limit the future scope for squabbles over property.
Why set up a trust?
A trust is a way of looking after property, money and other valuable items, for people who may not be able to look after them.
According to HM Revenues and Customs (HMRC), trusts may be set up for a number of reasons:
- to control and protect family assets;
- when someone is too young to handle their property and affairs;
- when someone can’t handle their property and affairs because they lack capacity;
- to pass on money or property while you are still alive;
- to pass on money or assets when you die under the terms of your will (known as a ‘will trust’); or
- under the rules of intestacy that apply when someone dies without leaving a valid will (in England and Wales).
There are other types of ‘non-family’ trusts but they aren’t relevant here.
How do they work?
Trusts are mainly set up to look after and pass on assets in a way that best protects the person intended to benefit from the trust. In this instance, it means the best way for you to put aside money, property and/or items for your child’s future, to make sure they get it as you intended if they aren’t able to manage it themselves.
If you are making a gift to your child or putting aside some of your estate for their future benefit, as part of the trust you ask someone to be a trustee to manage whatever you have put into the trust. People you appoint as trustees will be responsible for carrying out your wishes (as written down in the Trust deed which is a legal document).
There may be tax savings on ‘qualifying trusts’ for ‘vulnerable beneficiaries’. According to HMRC, ‘A beneficiary is anyone who benefits from a trust’. A vulnerable beneficiary is either a person who is mentally or physically disabled; or someone under 18 – called a relevant minor – who has lost a parent through death.
Over time a lot of legal rules have grown up around the management of trusts – which can make it seem complicated. Trust deeds can actually be quite straightforward, but there are a number of formalities when drafting them. It is generally recommended that you consult with a solicitor to be sure that any proposed trust arrangement will work in the way you want it to. Especially to make sure of tax advantages and to avoid any arguments later which could damage the trust to the point of destroying the intended benefit altogether.
Although it is not covered here – if you are planning for the future with wills and trusts, think too about writing a Lasting Power of Attorney covering your financial and welfare wishes should you lose capacity to manage your affairs during your lifetime.
Planning for the future may not be something you’d like to think about, but by seeking professional advice and taking some time to set out your wishes, you can help to secure your child’s future.
With thanks to Nigel Cullen, Freeths LLP. www.freeths.co.uk
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