What happens to my children when I die?

Jun 22, 2018

This is probably a question we all ask, but for most of us whose children have grown-up and may have their own families it is not normally a question of great concern.  However if you have children who suffer from physical or mental disabilities then this is a really important question.  Not that long ago the majority of children with physical or mental disabilities failed to make adulthood or died before attaining old age, whereas now  people can be expected to have a normal life expectancy.

As with so many things the real secret is planning.

The first priority is to think about how your child will be accommodated when you are no longer around.  It’s essential to try and help your child develop a degree of independence and ideally before you attain retirement age you should have some sort of arrangements in place which ensures that your child can live without requiring your immediate presence.  Social services and many self-help charities can often assist in what is a very painful and difficult logistical task.

The second thing to think about is finance.  How is your child’s care going to be financed?  Very often there are all sorts of allowances available which will help to fund your child’s care.  Some of these are means tested whilst others merely depend upon the degree of need.  Helping your child navigate this is by no means straightforward but if proper arrangements such as Powers of Attorney or Deputyship orders have been put in place it should be possible.  Consideration should also be given as to whether or not your pension can help out.  Some occupational pensions include provision for dependent relatives, this may well include your child and if so you should discuss the position with your pension provider in advance.  Alternatively if you have a SIPP it may well be that arrangements can be made to ensure that after your death residual funds in the SIPP are used to benefit your child.  Specialist advice from a financial adviser specialising in pensions is needed to ensure that this is done in such a way as to benefit your child without damaging any possible means tested benefits.

Thirdly you need to think about your Will.  If you simply bequeath a share of your estate to your child it may well prejudice their rights to any possible means tested benefits.  For this reason relying on the general law or on a simple Will is something to be avoided.

Equally the idea that you will leave everything to your one child on the basis that and they will do “the right thing” for your other children is fraught with problems and should also be avoided.  The answer is a carefully constructed Will.  It is possible to create special trusts which are designed to protect your estate for the benefit of your child without interfering with his or her means tested benefits and this is the solution that most people should look at.

There are two principal trusts, which may likely be of benefit; one is what we call a Discretionary Trust and the other is what is called a Vulnerable Person’s trust.  Each of these have their advantages and disadvantages but they share one common feature, which is that your estate does not belong to your child but can be used for their benefit.  As with so many things specialist advice is needed normally from a lawyer specialising in such matters.

A fourth consideration is to talk to any other members of your friends or family who might want to benefit your child.  In each case you should ensure that their wills also incorporate trusts for the benefit of your child rather than direct gifts.  It’s perhaps also worth mentioning that whilst this article has concentrated upon things to be done when you die and therefore to be incorporated into your will it is possible to create appropriate trusts for your child whilst you are alive and properly drafted these can both be tax efficient and be a useful repository for gifts from family and friends.

Both the creation and administration of these sorts of Trust is a fairly specialised area and not all Will draftsmen or lawyers have detailed experience of this sort of work so it is important to ensure you get advice from a suitably qualified specialist. At Herrington Carmichael we have specialised in working with parents of disabled children and with the Court of Protection for many years and have specialists who can advise on special Wills and Trusts and also point you in the direction of specialist advisers who can help with other matters mentioned in this article. 

 

By Anthony Tahourdin

Partner, Head of Private Client

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