If you have a relative who has a disability, and is unable to handle their own financial and legal affairs, making sure that they are provided for in the future is likely to be a key concern.
Leaving them money or assets directly in your will could affect their entitlement to means tested benefits and, if they have mental capacity issues, they may be unable to manage money for themselves or be at risk of being exploited financially.
Putting in place a trust – either during your lifetime or, via your will, on your death – is likely to be a useful way to provide financial stability for a relative with a disability during their lifetime.
There are different trust options available. For example, under a discretionary trust there will be several potential beneficiaries, who have no right to any income or capital – it will be up to the trustees to decide how much they receive, in accordance with the terms of the trust and the needs of the beneficiary. This means that assets held in the trust cannot be taken into account when assessing someone’s means tested benefits
In a vulnerable beneficiary trust, assets are held solely for the benefit of the disabled beneficiary (someone who is mentally or physically disabled) during their lifetime, i.e. they either receive all the income or, if not, it cannot go to anyone else. Provided certain conditions are met, the trust can qualify for income tax and capital gains tax advantages.
If you have been responsible for making decisions for someone who lacks the mental capacity to make their own decisions, for example as their parent, you may wish to make arrangements for someone to become their deputy when you are no longer around.
The deputy will need to be authorised by the Court of Protection to make financial decisions on the mentally incapable person’s behalf. An application can also be made to determine matters relating to their care and medical treatment, although the Court is usually reluctant to appoint a deputy to make such decisions on an ongoing basis.
There are some significant responsibilities in acting as a deputy, which normally include reporting annually on decisions made and accounting for how the person’s money has been managed. The deputy must make decisions in the other person’s best interests, take steps to help the other person to make their own decisions where possible and consult with others interested in the person’s care, including family and medical professionals.
In planning for the future of people with disabilities, seeking expert legal advice on issues such as trusts and appointing deputies is essential, to ensure their interests are protected in the most constructive way.
For more information on our estate planning services, please contact us.