Disabled Dependant

If you have a disabled child or other dependant you wish to make provision for this can raise difficult issues. A direct gift or a gift into what is called an income in possession trust may transpire to only replace what the state benefit system would otherwise provide under income support or other means tested benefits operating from time to time. The provision choice often transpires to be between:-

(a) A direct gift or income in possession trust notwithstanding its impact in relieving or reducing the burden which otherwise would be borne by the state.
(b) A minimal gift of say £3,000 only leaving the remaining care obligations to the state. In this situation you might expect your other children to “look after” your disabled child in the future out of their own increased inheritance. Such an expectation can work but you need to be comfortable about such other children being able to handle the influences of their own partners/spouses/children and the general financial pressures of life. There is obviously no guarantee your disabled child would in anyway be supported by your other children; your other children could also die before your disabled child.
(c) A discretionary trust where a whole range of potential beneficiaries could receive income and capital from time to time. A discretionary trust is often used for part of your estate on the “understanding” the income will be allocated to the disabled child only if needed and otherwise accumulated within the trust and on the death of the disabled child the trust will be would up and benefit the rest of the family. Such a formal trust arrangement would give you comfort that the funds would be properly applied but the administration and tax charges on a discretionary trust are likely to be more than the informal sibling arrangement particularly if your other children will pay income tax at the basic or higher rates.