Providing for Children and Others with Learning Difficulties

Challenges when leaving an inheritance

• If the child cannot manage their own affairs, a deputy must be appointed, which is expensive and slow.
• Vulnerable adults may be at risk of financial exploitation.
• If the child is on means-tested benefits, inheritance could push them over the capital limit, causing them to lose benefits.

Problems with leaving assets to siblings instead

• Siblings may fall out with the vulnerable child.
• Siblings’ financial difficulties or divorce could affect the child’s inheritance.
• Death of a sibling could create tax complications for the child’s inheritance.

Trusts as a solution

Will Trusts

• Ring-fence the inheritance for the child.
• Trustees manage the funds and make payments while keeping capital within benefit limits.
• Avoids the need for a Deputyship order.
• Reduces the risk of financial exploitation with trusted trustees in place.

Lifetime Trusts

• Set up during the parents’ lifetime.
• Money placed in the trust is not part of the estate for Inheritance Tax purposes.
• Other family members can contribute either during their lifetime or via their wills.

Benefits

• Provides protection and security for family members with special needs.
• Gives peace of mind for parents or carers.

Means-tested benefits considerations

• Beneficiaries with capital over £16,000 lose entitlement to means-tested benefits, for example Universal Credit, Pension Credit and Income Support.
• Capital between £6,000–£16,000 reduces benefits gradually.
• Capital below £6,000 is disregarded.
• A direct inheritance could result in benefits being lost, forcing the beneficiary to spend the money just to regain eligibility.

A trust in your will can appoint trustees to manage the inheritance. Capital can be paid out in a controlled way, ensuring it does not exceed £10,000, so benefits continue. Trust funds can be used for holidays, activities or improving quality of life without affecting benefits.

Next steps

To learn more about how trusts can work for your family, attend a free seminar or book an appointment.