Planning for Your Disabled Child’s Future

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Planning for Your Disabled Child's Future: A Guide for UK Families

As a parent of a disabled child, you want to ensure they are cared for and supported throughout their life, especially when you are no longer around. Planning for their future can feel overwhelming, but with careful financial and legal planning, you can secure their long-term well-being. As a trustee of Phoenix Autism Trust, I have seen first-hand the importance of future planning for disabled individuals and the peace of mind it can bring to families. Here’s what you need to consider as a UK-based parent.

1. Understanding the Importance of Future Planning

Many parents focus on the day-to-day needs of their disabled child, which is entirely understandable. However, it’s crucial to think about the long-term future, including how your child will be supported financially and who will manage their care. Planning ahead can bring peace of mind, ensuring your child continues to thrive even in your absence.

Without a clear plan in place, your child’s financial security, access to benefits, and quality of care could be at risk. Many families are unaware of the complex rules surrounding inheritance, trusts, and government benefits, which can unintentionally impact their child’s future support. By taking proactive steps now, you can ensure your child’s needs are met without jeopardising their eligibility for vital services.

2. Setting Up a Trust for Your Child

Trust is one of the most effective ways to provide financial security for your disabled child. By setting up a trust, you can:

  • Ensure your child has financial support without affecting their entitlement to means-tested benefits.
  • Protect your assets from being misused.
  • Appoint trustees to manage the funds in your child’s best interest.

Types of Trusts to Consider

There are different types of trusts available in the UK. Here are two that are particularly relevant for parents of disabled children:

  • Discretionary Trust: This is a flexible trust where trustees have the discretion to decide how the funds are used for your child’s benefit. The trustees can make decisions on how to allocate funds based on your child’s changing needs over time.
  • Disabled Person’s Trust: Specifically designed for people with disabilities, this trust offers tax advantages and ensures your child’s financial future is secure. The Disabled Person’s Trust has specific eligibility criteria and tax treatment rules, making it important to seek legal advice before setting one up.

How a Trust Protects Benefits

One of the key advantages of setting up a trust is that it can protect your child’s entitlement to means-tested benefits. If your child inherits money directly, it could affect their eligibility for benefits like Universal Credit and Housing Benefit. However, assets held within a trust are not counted as part of their personal wealth for benefit assessments.

Appointing Trustees

When setting up a trust, you need to appoint trustees who will manage the trust on behalf of your child. Choose individuals you trust implicitly and who understand your child’s needs. Trustees have a legal responsibility to act in the best interests of your child, so it’s essential to choose people who are reliable, responsible, and willing to take on the role.

You may also consider appointing a professional trustee, such as a solicitor or a financial adviser, to provide impartial management of the trust.

3. Writing a Will

Having an up-to-date will is essential for ensuring your wishes are carried out after your death. Your will should clearly outline your wishes regarding your disabled child’s care and the management of their inheritance. Without a will, your assets may not be distributed as you intend, which could jeopardise your child’s future.

When writing a will, consider the following:

  • Appointing a guardian: If your child is still a minor, you need to appoint a guardian who will take on the responsibility of caring for your child in your absence. This should be someone you trust and who understands your child’s specific needs.
  • Including provisions for the trust: Ensure your will includes instructions for any trust you have set up. This can include leaving specific assets or a portion of your estate to the trust.
  • Documenting your wishes for care: While a will primarily deals with financial matters, it’s also a good idea to document your wishes for your child’s care. This can include details about their medical needs, routines, and preferred living arrangements.

It’s advisable to work with a solicitor experienced in wills and trusts for families with disabled children to ensure your documents are legally sound and fit for purpose.

4. Applying for a Lasting Power of Attorney (LPA)

If your child has the mental capacity to make decisions, it’s worth considering setting up a Lasting Power of Attorney (LPA) to appoint someone to manage their financial and medical affairs if they become unable to do so.

There are two types of LPA:

  • Property and Financial Affairs LPA: Allows the appointed person to manage financial matters, such as paying bills, managing bank accounts, and handling investments.
  • Health and Welfare LPA: Allows decisions about healthcare and personal welfare, including medical treatment and living arrangements.

Deputyship for Those Without Capacity

If your child lacks the mental capacity to make decisions, you may need to apply for deputyship through the Court of Protection. This process can be time-consuming and costly, so it’s advisable to plan ahead and seek legal advice if you anticipate needing a deputyship order.

5. Exploring Government Benefits and Support

Your disabled child may be entitled to various government benefits and support schemes. Understanding what benefits are available can help you maximise financial support and plan accordingly.

Some key benefits include:

  • Disability Living Allowance (DLA): Available for children under 16 who have extra care needs or mobility issues.
  • Personal Independence Payment (PIP): For individuals aged 16 and over with a long-term health condition or disability.
  • Carer’s Allowance: If you spend at least 35 hours a week caring for your disabled child, you may be eligible.
  • Universal Credit: Provides financial support for living costs and includes additional payments for carers and those with disabilities.
  • Blue Badge Scheme: Offers parking concessions for people with severe mobility issues.

It’s important to regularly review your child’s eligibility for benefits, as criteria and policies can change.

6. Considering Life Insurance

Taking out a life insurance policy can provide a lump sum that can be placed into a trust for your child. This can ensure that funds are available to support their care needs and future living costs.

When selecting a policy, consider the following:

  • Payout structure: Ensure the payout goes directly into a trust to avoid impacting your child’s benefits.
  • Adequacy of cover: Review your policy regularly to ensure it remains adequate for your child’s needs.
  • Naming trustees: Specify trustees in your policy documentation to ensure the funds are managed correctly.

7. Creating a Letter of Wishes

A letter of wishes is a valuable document that can complement your will and trust. While not legally binding, it provides guidance to trustees and guardians about your child’s preferences, routines, and any specific care instructions.

In your letter of wishes, consider including:

  • Details of your child’s daily routine.
  • Medical needs and treatments.
  • Preferred living arrangements.
  • Social and recreational activities.
  • Any other personal preferences.

Updating your letter regularly ensures it remains relevant as your child’s needs change.

8. Seeking Professional Advice

Planning for your disabled child’s future involves navigating complex legal, financial, and welfare systems. It’s highly recommended to seek advice from professionals who understand the nuances of planning for disabled individuals, including:

  • Financial advisers: To help with trusts, investments, and life insurance.
  • Solicitors: To assist with wills, trusts, LPAs, and deputyship applications.
  • Specialist charities: Such as Mencap, Contact, and Scope, which offer guidance and resources for families.

Final Thoughts

Planning for your disabled child’s future can seem daunting, but taking proactive steps now can provide lasting peace of mind. By setting up a trust, writing a will, exploring government benefits, and seeking professional advice, you can help ensure your child is cared for and financially secure throughout their life.

If you would like support in creating a financial plan tailored to your family’s needs, please get in touch with us. As a financial adviser, I specialise in helping families secure their future, providing expert advice on trusts, life insurance, and more.

Together, we can create a plan that ensures your child’s well-being for years to come.

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