But ask any parent navigating a move for their child from mainstream primary to secondary school or an educational institution for special needs and you can almost see the steam coming out of their ears as they relay the exacerbation of trying to secure the right education and emotional support.
Sadly, things tend to get tougher as each year passes.
A small child who might be frustrated and showing aggression is easier to restrain and protect than a full-grown adolescent or adult.
An unfortunate facet of human tolerance is that youths and adults with special needs often struggle to get the same understanding, support, and kindness as youngsters. So, add that to the fear of who will look out for them once their parents have died, it is no wonder that parents worry enormously about their child’s future.
Seeking professional advice is essential and will enable you to plan who will care for your child, who will manage their finances, how you can provide for them in the most tax efficient way and ensure flexibility long into the future.
This is likely to involve wills, including a trust, possibly coupled with a lifetime trust, lasting powers of attorney relating to property and finance and health and welfare, and if mental capacity is lacking, a deputyship application to the Court of Protection.
Understanding the impact of inheritance tax, capital gains tax, income tax and the welfare benefits system is essential when deciding on the most appropriate course of action.
A trust is usually central to planning and although everyone’s circumstances are different, the main trust options are usually a discretionary trust or discretionary disabled persons trust.
Each has its own advantages and considerations, particularly regarding tax implications.
1. Discretionary trusts
A discretionary trust is a trust where the trustees have discretion regarding distribution of income and capital to all or any of the potential beneficiaries listed.
This would obviously include the vulnerable child but would need to name others to whom distributions could be made if funds are still held in the trust after the vulnerable child’s death.
Tax considerations and the value and type of assets that go into the trust will be key drivers in determining whether this type of trust should be setup or a disabled person discretionary trust.
IHT
You cannot transfer more than £325,000 each into this type of trust without triggering an immediate charge to IHT at the lifetime rate of 20 per cent on the excess. Survival by seven years would mean that the value settled is excluded from your estate for IHT purposes.
