Wills and Future Planning

WellChild and Irwin Mitchell share a vision to help build stronger communities. We have teamed up to create a legal section for the WellChild Information Hub. This article on Future Planning is part of a series of legal articles aimed at families with children who have complex medical needs.

Planning for the future is crucial, especially when it involves the well-being of a child who has a disability or has suffered from a serious injury or illness. We understand the unique challenges that families face and we’re here to help you safeguard your future with care and consideration.

Estate Planning is the process of working out the best way to pass on your assets to the people you want to benefit, while considering all of the legal, financial, and tax implications. In this article, we set out our five top tips on how to make the most of the Estate Planning process, tailored to those who provide for a child or other relative who has a disability or additional needs.

Top Tip 1: Prepare a Will

Recent surveys have suggested that between 50% and 60% of UK adults do not have a Will. Maybe that’s not too surprising – after all, there are many more exciting things to think about than what might happen when you die! However, the consequences of not having a Will are significant.

What happens if I don’t have a Will?

Without a Will, you are relying on the Rules of Intestacy – laws which determine which members of your family tree inherit from you. Relying on these laws is very risky. If you are in a long-term relationship but are not married, your partner will likely receive nothing from your estate. Even spouses and civil partners are not guaranteed to inherit everything under the intestacy rules.

Importantly, you have no means of controlling when and in what way your children or grandchildren inherit from you. This is particularly problematic when they have additional needs.

Choosing a Will provider

You should choose your Will provider carefully. In the UK, there is no legal requirement for professional Will writers to have any relevant qualifications or experience and there have been recent examples of some companies acting incompetently or even dishonestly.

To avoid this, look for companies that are regulated and insured, such as:

• Solicitors.
• Banks.
• Accountants.
• Financial planners.

You can also look for individuals who are members of STEP (the Society of Trust and Estate Practitioners). STEP is the professional body for anyone involved in this area of law, and membership requires undertaking several qualifications.

Reviewing my Will

Wills should be reviewed regularly to make sure they:

• Reflect your current wishes.
• Remain effective after any changes in laws or taxes.

Does my child need their own Will?

If your child with medical needs has their own assets (or has a Personal Injury Trust set up to hold money from a personal injury claim), they should consider writing their own Will, if possible.

There is a specific test to determine whether someone has the mental capacity to make a Will (this is called “testamentary capacity”). This is a separate test from the general capacity test. If there is any doubt about whether someone has the right level of capacity, a professional capacity test should be carried out before any Will is prepared.

If your child does not have capacity to make their own Will, it is possible to make an application to the Court of Protection for a “Statutory Will” to be put in place on their behalf. This is a complex (and potentially expensive) process that requires specialist advice.

Top Tip 2: Consider creating a Trust Fund in your Will

The idea of a Trust Fund might seem a bit confusing and daunting, but it is just an arrangement where you transfer funds to someone (a Trustee), who then controls them for your chosen beneficiaries according to the terms that you set out. It is a way of separating who controls an asset from who benefits from it.

For individuals wanting to provide for loved ones who have any form of disability, including a Trust Fund within your Will for the disabled beneficiary is essential in most cases.

Here are some of the benefits of creating a Trust Fund in your Will:

Choosing the right type of trust fund

There are many different types of Trust Fund. Each works slightly differently and has different tax implications.

There is even a special category of trust called a “Disabled Person’s Trust” which has different tax rules from other trusts. This could have benefits for your family, but just because it says ‘disabled’ in the name doesn’t mean it is the right type of trust for every disabled person and their family!

It is very important to get proper legal advice about Trust Fund options to ensure you make the best choice for your unique circumstances.

Choosing the right trustee

Trustees should be chosen carefully. The clue is in the name! You must trust them as you will be giving them a lot of responsibility and power to implement your wishes. You can appoint professional trustees if you are not comfortable appointing friends and family for the role.

You can appoint up to four trustees.

Top Tip 3: Plan for Inheritance Tax and Care Fees

Inheritance Tax won’t affect most people, but for those it does, it can significantly reduce the value of the estate. Many people will have seen firsthand just how quickly the cost of care can almost completely wipe out an estate. If you are concerned about these issues and want to ensure you pass on as much as possible to your family, especially any loved one who has additional needs, then it pays to start planning for these issues as early as possible.

There are many ways to plan for Inheritance Tax and the cost of care. This can include:

• Legal solutions, such as making gifts and setting up trust funds whilst you are alive.
• Writing a carefully structured Will. This can often help with both issues and is another reason to get good Will writing advice.
• Financial Planners can also offer solutions, such as life insurance policies and Inheritance Tax-efficient investments.

Getting a combination of good legal and financial advice on your estate planning is the best way to identify the right solutions for your circumstances.

Top Tip 4: Consider what will happen to your Pension and Death in Service payments

If you are (or were) employed, you may have a private pension fund and an entitlement to a Death in Service payment from your employer. In the event of your death, large cash sums may be payable from these different sources, but it is important to understand that your Will cannot control what happens to these payments.

Instead, the trustees of your employer’s pension scheme will have discretion about who they should pay the funds to, usually following a nomination you made when you first started employment with the company. You can (and should!) keep your nomination updated regularly to ensure these benefits go to the people you want to receive them.

Using my Pension and Death in Service payment for my child

If you want your pension and death in service payments to be used for a disabled beneficiary, careful consideration should be given to ensure these funds are transferred to a Trust Fund.

Remember that even if you have included a Trust Fund in your Will, that does not control your pension and death in service benefits which could still be paid directly to the disabled person.

Setting up a Trust Fund before your death

One solution to this is to set up a Trust Fund during your lifetime, rather than just creating it through your Will. The process for this is as follows:

1. Set up a Trust Fund while you are still alive.
2. Name that Trust Fund as the nominated beneficiary of your pension fund and death in service payments. This ensures that the funds do not go directly to the disabled person.
3. When you write your Will, you can leave your estate to this same Trust Fund. This means that everything ends up in one place.

You should take professional advice on your options to ensure the solution you implement is right for your circumstances.

Using my pension to pay beneficiaries

An alternative option is to keep your pension after you die to pay an income to the beneficiaries. It is important to carefully consider whether any ongoing income your child receives from the pension would affect their means-tested benefits

In this case, it may be better to have a cash sum paid into a Trust Fund for them instead. You may benefit from taking financial planning advice regarding the options for your pension.

Top Tip 5: Create Lasting Powers of Attorney (LPAs)

As a parent or other relative of a child with a disability, you understandably might have thought a lot about how someone will be able to look after the disabled person’s affairs if they don’t have the capacity to do so. However, it is just as important to consider what would happen if you lost capacity to manage your own affairs.

The risk of losing capacity, unfortunately, exists at any age, and if you have not planned for that scenario in advance, it can leave your family in a difficult situation. Preparing LPAs as early as possible means:

• You have control over who takes over for you.
• You can include instructions and guidance in the LPA documents to guide your Attorneys on how you would like them to use their powers.

There are two types of LPA:

• Type 1: Appoints someone to make decisions about your property and finances.
• Type 2: Appoints someone to make decisions about your health and welfare.

How does my LPA relate to my child?

LPAs for your finances are especially important if anyone is financially dependent on you, particularly anyone who has a disability where the dependency may continue long-term.

Your attorneys must look after your own interests, so it can be challenging for them to use your funds to provide for others even where you had done so before you lost mental capacity. It is very important to consider carefully how to address this and give clear guidance in the LPA documents.

You should consider how you would like the Attorneys to balance your own financial needs with those of the disabled person. (For example, if you need care and finances are limited, should the Attorneys accept a lower standard of care for you in order to continue supporting the disabled person from your funds?)

Professional advisors can help work through these questions and ensure the LPAs achieve your wishes as far as possible.

What happens if I am an Attorney for my child?

If you also act as an Attorney or Deputy for your child, you cannot control who takes over that role after you die.

If substitute Attorneys were named for your child

If your child was able to put in place a Power of Attorney themselves, they may have named substitute Attorneys who would take over following your death.

If no substitute Attorneys were named for your child

If your child’s Lasting Power of Attorney does not name any substitute Attorneys, either:

1. Your child would have to make a new Lasting Power of Attorney after your death (provided they still have capacity to do so).
2. An application would have to be made to the Court of Protection to appoint a Deputy to replace you.

What happens if I am a Deputy for my child?

If you already act as a Deputy for your child because they don’t have mental capacity, then, after your death, the existing Deputyship Order will be terminated, and the Court of Protection will have to appoint a replacement for you.

Further assistance

Everyone’s circumstances are unique, and the tips highlighted in this article are not an exhaustive list of everything you may need to consider. If you are considering setting up a Trust Fund, either whilst you are alive or through your will, it is very important to get personalised professional help and advice regarding the type of trust to use and the process to set it up. There many solicitors based throughout the UK who can provide specialist support in creating your Will.

Irwin Mitchell who created this article are specialist solicitors and could support you. Please note, there will be costs associated with using solicitors. Irwin Mitchell’s contact details can be found at the top of this article.

The charity Family Fund, have a free Will-writing service. You can write your Will online, over the phone, or face-to-face in as little as 15 minutes. Click here to access the service.

The information in this article was correct at the time of publishing but may be subject to change

If you have any comments, ideas, or suggestions about this article don’t hesitate to get in touch with us at [email protected]

Please don’t forget to leave feedback on this article!