Discretionary Trust and Disability trust - Trusts and Wills for people with a learning disability

Wills and Trusts for people with learning disabilities or other special needs

As part of our work with people with learning disabilities and other special needs, SheridanLaw sets up and advises on Discretionary Trusts, Disabled Person Trusts and other types of trust for the benefit of individuals with learning disabilities and other special needs.

Daniel Sheridan is a recognised authority on providing for people with learning disabilities through wills and and trusts and frequently lectures on the subject, both to parents (he is a regular speaker for Mencap and other charities on the topic) and to other solicitors, including through the use of webinars.

A large amount of our work in this area is through referrals from other solicitors who recognise that this is an extremely technical and complex area requiring specialised knowledge.

We are able to advise on the type of Trust that is most suitable for your son or daughter's particular circumstances, taking into account factors such as

o ensuring access to means-tested state benefits

o inheritance tax mitigation

o how best to ensure that the wishes of the person setting up the trust are fully respected

Our Approach

At an initial meeting we discuss your family’s circumstances and all of the options available, including the structure of the Trust and who you might want to serve as Trustees.

We appreciate how daunting it can be to make decisions about future provision for a loved one with a disability and we take the time to listen to your concerns and understand exactly what you want to acheive.

Our priority is to recommend and implement a solution for our clients that is both cost-effective and in the best interests of their learning disabled son or daughter. Although in some situations it will be best to use a professional Trustee such as a solicitor from SheridanLaw, for many clients it is preferable to use family members, as this can significantly reduce costs of administering the Trust. When you meet us we will be able to discuss the approach that is best for your particular circumstances.

Please telephone us on 020 8541 1181 to learn more about our service.

Background information on Trusts for disabled beneficiaries

It is often better to set up a Trust for someone with a learning disability or other special need than to leave a direct legacy in a Will

Many parents would like to leave their son or daughter wtih a learning disability a legacy in their Will. However, in most cases it is best not to do this.

Firstly, a legacy left directly to your learning disabled son or daughter might jeopardise his or her access to state benefits and local authority funding. Many people with a learning disability or other special need receive means-tested benefits such as income support, residential care funding and housing benefits. A legacy in your Will could leave your son or daughter ineligible for the key benefits upon which he or she depends.

Secondly, some people with a learning disability lack the maturity to manage an inheritance and are likely to sqaunder money and property that is given directly to them. There is also a risk that people will take advantage of their naivety.

Thirdly, if your son or daughter is not considered capable of managing a legacy themselves, the Court of Protection may step in and appoint someone to manage the money and property. Because you will have passed away by this time, you will not have any say over who is appointed to this role.

Some people try to avoid these problems by leaving their son or daughter with a learning disability out of their Will with the intention that another family member - to whom they do leave a legacy - will look after him or her. This can have unexpected negative consequences.

Firstly, there is no certainty that the family member to whom you leave the legacy will carry out your wishes. Even if you trust the person completely, changing circumstances could mean that they lose control over the inheritance, for example by becoming bankrupt or divorced.

Secondly, excluding a dependant with a disability from your Will exposes your Estate to the risk of the Will being dsiputed. Where Wills are disputed, the consequences for families - both financially and emotionally - can be very negative. For more information take a look at our page on Will Disputes / Contentious Probate

A more effective way to provide for your son or daughter with a learning disability or other special need that manages to avoid many of the problems associated with leaving a direct legacy is to set up a Discretionary Trust.

Discretionary Trusts – an alternative way to provide for your child

A Discretionary Trust is a way to make long term financial provision for someone with a learning disability that avoids many of the problems associated with leaving a legacy in a Will or excluding someone from a Will.

A Discretionary Trust is an arrangement under which money and/or property (which can include the family house) is managed by Trustees for the benefit of others - the Beneficiaries. The relationship between the person setting up the Trust (the Settlor), Trustees and Beneficiaries is summarised in the diagram below

You can set up a Discretionary Trust to come into existence during your lifetime. Alternatively, you can include provisions in your Will that create a Discretionary Trust after you pass away.

Once you have put money or property into a Trust the Trustees have complete discretion about how it is be spent.

The defining characteristic of a Discretionary Trust is the wide discretion given to the Trustees. The person creating the Trust can express his or her wishes about how the money should be used, but legally the Trustees have complete freedom about how the money is spent.

Needless to say, it is vital to appoint people you trust as Trustees. You should choose Trustees who will act in the best interest of your son or daughter. Some people prefer family members. Others prefer professionals, such as a local solicitor. You can have between 1 and 4 Trustees, and many people like to have a combination of family members and professionals. It is important that at least one of the Trustees has the financial and legal knowledge to manage the money and property effectively.

Comparison of 5 alternative ways to leave money or property to someone with a learning disability after you pass away

Alternative ways to leave money	What happens after you die	Advantages and Disadvantages
Make no legal provisions for after you pass away	After you die, your money and property will be distributed according to a pre-determined order, known as the Rules of Intestacy. The amount your son or daughter with a learning disability will obtain depends on your family circumstances at the time of death, for example, how many other childrenyou have and whether you have a spouse.. You will have no say regarding whether, and if so how much, your learning disabled son or daughter (or indeed, anyone else) will inherit from your Estate.	Advantages None Disadvantages You have no say over the amount of money or property your son or daughter will receive from your Estate, and they may receive nothing at all. Any money or property inherited by your son or daughter with a learning disability will impact eligibility to state benefits. If your learning disabled son or daughter is not mature enough to handle the money or property, it may be wasted and he or she may be vulnerable to exploitation. The Court of Protection might step in and appoint someone (who would not have been chosen by you) to take responsibility for the money.
Leave a direct legacy in your Will	After you die, the person with a learning disability will receive the amount specified in your Will.	Advantages You decide how much goes to your son or daughter with a learning disability. Disadvantages The legacy may have a significant effect on eligibility for state benefits. If your learning disabled son or daughter is not mature enough to handle the legacy, it may be wasted, or he or she may be vulnerable to exploitation The Court of Protection might step in and appoint someone (who would not have been chosen by you) to take responsibility for the money or property you gave to the person with a learning disability.
Exclude your son or daughter with a learning disability from your Will but ask somone else (eg another child) to use the legacy they receive in the Will to support the person with a learning disability	After you die, your son or daughter with a learning disability will receive nothing and the person you left the legacy to will have no legal obligation towards him or her.	Advantages The person with a learning disability’s state benefits will not be impacted Someone you have chosen will look after the money you intend to be used for your learning disabled son or daughter, rather than someone who is appointed by the Court of Protection Disadvantages The person to whom you leave the money has no obligation to use the money or property for the benefit of the person with a learning disability. Legally, it is entirely theirs. Even if you believe that the person you leave the money to will ‘do the right thing’ there is no guarantee. If, for example, they were to get divorced or become bankrupt, the money you had intended for your disabled child would not be treated as separate, and could therefore disappear. If you fail to provide for your child with a learning disability, there is a risk of the Will being disputed – a process that is emotionally, as well as financially, draining on families.
Create a Discretionary Trust in your Will	After you die, a Trust will come into being. The terms of the Trust, including the identity of the Trustees and Beneficiaries, will have been specified your Will.	Advantages A properly created Trust in a Will does not impact the Beneficiary’s (i.e. the person with a disability’s) access to state benefits The Trustees will control the money and property, so the person with a disability will not be able to squander it. Nor will it be possible for another person to take advantage of his or her naivety in relation to financial matters. You choose the Trustees – so it is you, rather than the Court of Protection, who decides on the identity of the person (or people) managing the money intended for the person with a learning disability. Disadvantages Because the Trust only comes into existence after you die, other people who want to leave a legacy to the person with a disability will not be able to leave a legacy to the Trust whilst you are still alive. The Trustees have complete discretion over how the money and property is used – so there is no guarantee that they will use the assets in the way you would like.
Create a Discretionary Trust in your lifetime	After you draft the Trust (ie whilst you are still alive) a Trust comes into existence. However, there is no need to put significant money or property into the Trust until you die. This is done by leaving a legacy to the Trust in your Will.	Advantages A properly created Trust does not impact the Beneficiary’s (i.e. the person with a disability’s) access to state benefits The Trustees will control the money and property, so the person with a disability will not be able to squander it. Nor will it be possible for another person to take advantage of his or her naivety in relation to financial matters. You choose the Trustees – so it is you, rather than the Court of Protection - who decides on the identity of the person (or people) managing the money intended for the person with a learning disability. Because the Trust will exist from the day you create it, other people can give gifts, or leave legacies, to the Trust whilst you are still alive. This is particularly welcome to grandparents and other relatives who may wish to leave something to the person with a learning disability. Disadvantages The Trustees have complete discretion over how the money and property is used – so there is no guarantee that they will use the assets in the way you would like

Parents should not underestimate the importance of providing for their children who have a disability.

Please do not hesitate to call us if you have any questions about trusts or any of the issues relevant to providing for your son or daughter with a learning disability - we are here to help.

If you would like to learn more about our Discretionary Trust and Disability Trust services, please telephone us on 020 8541 1181 or email us at mail@sheridanlaw.co.uk