Trusts for Disabled Persons
Parents of disabled children will be concerned with making sure that they are well looked after. Often, if your child is mentally disabled they will be unable to make financial decisions. Also physically disabled children under the age of 18 will require someone to make sensible financial decisions on their behalf. If a disabled discretionary trust is included in a will it ensures that the money does not have to be used to pay care fees, and the trustees have total discretion as to how much is paid out to or for the benefit of the disabled person.
The Inheritance Tax Act 1984 exempts discretionary trusts for disabled persons from the periodic and exit charges which apply to normal discretionary trusts. In order to comply with the requirements of the Act, the trust must provide that not less than half of the capital which is applied during the life of the disabled person must be applied for his or her benefit. This does not mean that half the capital has to be paid out - only that, if there is a distribution of capital, the disabled person must receive at least half of it.
It is not however a requirement of the Act that any of the income has to be paid to or for the benefit of the disabled person. The Trustees can, if they wish, accumulate it or they can pay it to any one or more of the other beneficiaries who are named in the will.
Trusts for Children
Those of us who have children would wish to protect them when we have gone, especially those under 16 years. The inclusion of a children’s trust in your will provides them with both financial and personal protection.
If a child under 18 is orphaned, he or she needs to have a legal Guardian. If a child is under 16 he or she must live with the Guardian(s). If the child is over 16 the Guardian(s) is (are) responsible for the child and, for example, if he or she has dealings with the police, the police will have to contact the Guardian(s).
If one parent dies and the surviving parent has ‘parental responsibility’ then that parent usually maintains that responsibility and is therefore the legal Guardian (regardless of who is appointed Guardian in the deceased parent’s Will) unless a Court decides otherwise for some reason.
So if both parents die (not necessarily at the same time) any orphaned children under the age of 18 will need to have at least one Guardian. If the parents have not made any provision in their Wills for Guardians to be appointed, Social Services will decide who the Guardian will be. It must be said that, even if Guardians are appointed in Wills, Social Services may still get involved but there will be clear guidance as to the wishes of the parents. For example both sets of grandparents may want to be Guardians but the wills only appoint one set.
Be careful when appointing couples (married or not) as Guardians. If one dies or is incapable of being a Guardian, are you happy for the other to be the sole Guardian?
The role of Guardians is to look after the welfare of the children. This covers such things as where the children live, their general maintenance, medical decisions, decisions about religion and education. Guardians do not necessarily look after the children’s assets. This is the role of Trustees.
In the same way that Guardians need to be appointed to look after the children’s welfare, so Trustees need to be appointed to look after their assets. At least two Trustees must be appointed and they can be the same people as your Executors or the children’s Guardians. It is recommended that the Trustees and Guardians should not be exactly the same people, although some overlap is permissible).
If nothing is mentioned in your will, the default is that children will inherit when they reach 18 and the Trustees (or your Executors, if no separate Trustees have been appointed) will look after their assets until that time. However, you can specify any greater age as the age at which your children are to inherit.
In the time between your death and the and the age you wish your children to inherit, the children’s Trustees can use the children’s assets for the maintenance, welfare and education of the children and they can advance such sums of money to them as they deem appropriate. When the children reach the age you have specified, any assets remaining are theirs as of right.
*parental responsibility is a legal definition. All birth mothers (unless the child was given up for adoption) have parental responsibility but not necessarily all birth fathers.