Inheritance for disabled child

tim_n

I have a 4 year old and potentially several pots likely to be inherited in the near future (by 14, most likely three seperate pots).  She is non verbal autistic and unlikely - at least at the moment - to be able to manage her money herself, neither is she likely to ever work.  We hope things will change and a miracle will happen, but, like my son, we are planning for her future.

Whilst I'm fairly savvy at getting good rates, thanks to todays BBC news story about autistic children not being able to access their child funds, I've become aware that she cannot have more than £6k before this impacts any future universal credit when she's 18, and at £16k she will not get any help until she's spent her savings.  This money is being provided by still living relatives to make sure she has an enjoyable life as is their wish, not just subsistence.

We do have a pension in place we pay into for her, which I assume does not count against universal credit - so technically the money could be paid into that.  But I wonder if there are any other legal mechanisms like a trust fund controlled by us so she can enjoy her inheritance?  Happy to get financial planning advice but if anyone has had anything similar it'd be good so I can read up before I go to any planning meeting so I understand some of the ins and outs.

tacpot12

Unfortunately, the benefits system regards the capital a person has as being equally able to be used for their subsistence and for their enjoyment. The benefits system is a safety net for people who don't have any money, it's not designed as a form of universal income. If you put the money into a trust fund, your daughter will still be treated as having the money, so she won't be able to claim Universal Credit if her total capital is above £16,000. You are also likely to incure extra costs in running the trust, so it could make her worse off.

If the total is only a bit over £16,000 she/you can spend some of it on things she objectively needs. Keep the receipts and document the purpose of the purchases made to bring her capital below £16,000. 

Have you claimed DLA for her? When she is 16 she will be able to apply for Personal Independence Payments (PIP) and these are not means tested.

You might even discuss the idea of the relatives gifting you the money and you informally using it for her benefit. You can use the money to pay into her pension, and save your own money into a Stocks and Shares ISA (or your own pension) and make her the beneficiary in your Will (or by nomination with your pension). You might even discuss the idea of the relatives gifting you the money and you informally using it for her benefit. On reflection, this is probably the idea solution, but clearly the relatives would have to trust that you would use the money for her benefit. The other risks is you are married, and were to get divorced, your spouse could rightly claim half of the money and then spend it on themselves. You would need to judge yourself whether there is any chance of this.

You can use your own ISA allowances to build up a fund for your daughter that you leave to her in your Will, but it is likely that any means-tested benefits she was receiving would stop if she inherited more than £16,000 or whatever the limit is when you died. 

tim_n

We're in receipt of DLA for her - we dont know anything really about the benefits system and I'd assumed (probably wrongly) that this replaced the disability allowances when she got to 18.  So it wasn't a case of trying to fiddle the system, just that it appeared that money that should be helping her to adapt to her situation was potentially being used for food/rent etc.

I've been reading and watching some videos over lunch and it suggested that trust funds were not taken into account for benefit payments, but if that's not the case then the ISA route will work, but this was mostly in case we weren't about anymore - I'd been looking at the mencap trust site which seemed to sugges this was the case.

tacpot12

Good job you mentioned Mencap. I looked it up, and it seems I was wrong, because money in a Discretionary Trust would not be taken into account as Capital for Universal Credit. The information I checked didn't make the distinction between discretinary and non-discretionary trusts. Apologies for that.

The Benefits forum on MSE is a good place to ask for advice on means-tested benefits, and there is Disabilty Money Matters forum for DLA/PIP and other disability benefit questions.

boingy

It's brilliant that you are looking ahead and seeking the best way to provide a better future for your daughter. I cannot advise what that way is but I do want to add a cautionary note about discretionary trusts (and probably other trusts too).

Make sure you have a clear idea of the costs of such a trust, not just the setup costs but the ongoing costs you incur each time something changes. That might be a trustee being added, removed or dying, or the point at which you want to dissolve the trust, or pass it on in a will, or unforeseen stuff like HMRC suddenly deciding all trusts have to be registered with them like they did last year, which you can theoretically do yourself but in reality it needs some solicitor time. I'm a trustee of three family trusts and the solicitor fees total more than £8000 so far and counting. If my parents had known how much it would end up costing their kids they might well have made some different choices back then!

A trust might still be the best option but enter into one with your eyes open and walk away from any solicitor that doesn't want to talk about the future costs and possible downsides. 

You can't be the only person wanting to do this. Maybe ask some of the disability charities and/or forums as well as this forum.

xylophone

https://www.mencap.org.uk/advice-and-support/wills-and-trusts-service?gad=1&gclid=EAIaIQobChMIr7W6zeDF_wIV54KDBx2QZgWvEAAYASAAEgLHj_D_BwE

theoretica

As above, it really depends on how much money there is likely to be, £10k may not be worth setting up a trust, £500k probably would be! 

Bigwheels1111

My friend is in the same position, non verbal son but only 7.
Forgetting money for now.
The issue is the family home.
Worth 750k and 2 kids.
All benefits would stop etc.

housebuyer143

Bigwheels1111 said:

My friend is in the same position, non verbal son but only 7.
Forgetting money for now.
The issue is the family home.
Worth 750k and 2 kids.
All benefits would stop etc.

Not sure how? Family home isn't counted towards affordability and PIP isn't means tested.

xylophone

Not sure how?

Perhaps the parents are thinking about their wills.

Presumably they would wish to leave half the value to one child and half to the the other.

They will certainly wish to take expert advice when taking into account IHT implications for the family home and the tax treatment of trusts for vulnerable persons.

https://www.gov.uk/inheritance-tax/passing-on-home

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem3400

Keep_pedalling

You should be talking to a STEP solicitor regarding the best way of protecting any inheritance she received from you. A discretionary trust is likely be an option but you need professional advice.