How do I make decisions for my disabled child?

Posted on By Louise Polcaro
decisions for disabled child

Until a disabled child reaches the age of 18, parents (in most cases) will have parental responsibility for their child and, therefore, can make most decisions for them. However, once a child reaches 18 the legal position on decision making changes. Parents lose parental responsibility and no longer have any legal responsibilities or automatic rights to make decisions about their child.

In England and Wales, the starting point for a disabled individual and/or their parent to consider, with regards to decision making, is to assess each decision separately and establish whether your child is able to make this decision for themselves. This is a key principle of the Mental Capacity Act 2005 and it must be assumed that everyone has the capacity to make a decision for themselves unless it can be shown that they lack the mental capacity to do so.

If it is clear that your child isn’t able to make a particular decision, then the decision must be taken on their behalf and the Mental Capacity Act sets out how this must be done. The process will depend on the type of decision to be made.

Health and welfare decisions

Probably the most important type of decisions for your disabled child are those dealing with their health and welfare, for example medical treatment; where to live; what care is given; etc.

The person making the decision may vary depending on the type of decision required. It could be a carer, a health professional, a social worker or a parent. This person must consider a number of factors before the decision is made and the Mental Capacity Act states that any decision must be made in the child’s ‘best interests’.

It’s important to have a good understanding of the Mental Capacity Act and how the decision-making process should work when a decision needs to be made. Any person making a decision for your child should consider whether it is appropriate to consult others, including you as parents, for your views on what is in your child’s best interests.

If there is a dispute in the decision-making process, then attempts should be made to resolve these. It might be necessary to obtain a second opinion on a particular matter, or hold a ‘best interests’ meeting or conference with the relevant parties.

How does the Court of Protection fit in?

The Court of Protection has the power to make decisions on behalf of a person who lacks the mental capacity to make their own decisions or they can appoint a deputy who is given specific powers to make decisions on behalf of that person.

For most decisions that need making, following the Mental Capacity Act will enable decisions to be taken in the best interests of your child.  It is generally considered a last resort to apply to the Court.

The type of application made will vary depending on the circumstances at the time. The Court could be asked to make a decision about a particular matter, such as what treatment they should or shouldn’t receive. The Court can also be asked to appoint a deputy who will have certain powers to make decisions on your child’s behalf for a specific period of time.

In some situations, an emergency application can be made to the Court if a decision is required urgently and there is a risk of harm or loss to an individual.

Financial decisions

It is also important to think about what financial matters your disabled child may need help with. What assets do they have in their name? What income do they receive?

If your child is receiving benefits, then you should check with the Department for Work and Pensions if you are the appointee and, therefore, are the person responsible for managing these.

Any organisations where your child has assets may not allow you to manage those assets once your child is 18. For example, banks will require your child to take control of their account and they usually only accept instructions directly from the account holder.

If your child does not have the mental capacity to manage these assets, then you can apply to the Court of Protection to become their deputy for financial matters.

Any application for a deputyship will be considered by the Court and, if approved, they will issue a Deputy Order appointing the deputy and setting out what the deputy can and can’t do. The Deputy Order will then give you the necessary legal authority to manage your child’s financial affairs.

Who can help?

If you have any queries or concerns about how to make decisions for your disabled child, you should speak to a qualified professional, who will be able to advise on the best course for you and your family.

Katherine Miller TEP is a Director and Solicitor at Renaissance Legal

How can I make sure my disabled child is provided for when I die?

Posted on By admin
young person on motorized wheelchair

Providing for our loved ones when we die is one of the most compelling reasons to make a will. If you have a disabled child this is even more important, as they will have specific and often costly needs that need special consideration.

The term ‘disabled’ can encompass a number of different disabilities. These could be physical and/or learning disabilities. People can be vulnerable for all sorts of reasons and careful thought should be given to the provisions that should be included to benefit them in a will.

What are the key considerations?

  • Where will they live?
  • What financial benefits are they already receiving?
  • What help are other family members providing?
  • What care plans are in place?
  • While it may be difficult, it is also important to think about your child’s life expectancy and medical prognosis.

When all the above factors have been thought about carefully, a will can be drawn up and a number of options can be looked at to ensure that appropriate financial provision is included.

Option 1: Making an ‘absolute gift’

The will can include what is known as an ‘absolute gift’. This means that your child will receive a financial benefit that is unrestricted and that will belong to them to do with as they wish.

Provisions are usually made for trustees to look after that money on behalf of your child until they reach the legal age of majority (18), but after that the money will belong to your child without any restriction. Before choosing this option you should think about whether your child is likely to have sufficient capacity when they reach adulthood to make decisions about how they use that money.

The gift would, in time, form part of your child’s estate, so you also need to think about whether your child is likely to have sufficient capacity at the appropriate time to make a will.

If your child is receiving means-tested benefits, you should bear in mind that by giving an absolute gift, this would be taken into consideration in calculating benefits, which may then be lost. This therefore needs careful consideration to ensure that your child isn’t disadvantaged by your decision.

Option 2: Using a life interest trust

Another possible option is to use a ‘life interest trust’. This would mean that trustees appointed in your will would look after the money you have set aside for your child during your child’s lifetime. The trustees would usually invest this money and the income produced on the investments would be available for your child for the remainder of their life. When your child passes away, the remaining money would be passed onto other individuals, who you name in your will.

Bear in mind that the income your child receives will be taken into consideration when they are assessed for any means tested benefits (the capital will not be taken into consideration).

In certain circumstances, and depending on the wording of your will, the trustees can sometimes make a ‘one-off payment’ of capital to your child, for example to pay for a holiday, or buy some equipment. The amount of capital that can be used for these purposes can be restricted by the wording used in setting up the trust.

Option 3: Using a discretionary trust

Another option to consider is a ‘discretionary trust’. The trustees would look after the assets (property, money, etc) within the trust and they are given absolute discretion to use both the income and the capital for your child’s benefit. There can also be other beneficiaries (perhaps other children and grandchildren) who will be able to benefit from the trust.

If you set up this kind of trust in your will, you would be asked to provide a letter of wishes addressed to the trustees that you have chosen, which sets out how you would wish them to make decisions about the assets in the trust.

On the death of your disabled child, any assets remaining in the trust can be distributed to the other beneficiaries.

Tax consequences

When setting up any sort of trust in a will, you should take advice on the tax consequences of the various options to ensure that you understand the advantages and disadvantages of any choice that you make.

There is a particular sort of trust that can be advantageous to use, which is called a ‘Vulnerable Beneficiary Trust’. This trust is recognised by HMRC and gets special tax treatment.

The definition of a ‘vulnerable beneficiary’ and the various tax consequences are clearly set out on the GOV.UK website.

In these trusts the vulnerable beneficiary (the disabled child) is entitled to receive the benefits from the trust during the remainder of their lifetime. Only a small amount of assets in the trust can be used for the benefit of someone else while the disabled person remains alive. The other beneficiaries would be entitled to what remains in the trust after the death of the disabled child.

When the disabled child dies it should be noted that the assets in the trust will be treated as part of their estate for inheritance tax purposes before they are distributed to the remaining beneficiaries of the trust.

Relying on your other children

You may be considering relying on your other children to look after their disabled brother or sister after you have died, so you don’t plan to leave anything to your disabled child in your will. This is a dangerous option and not one that is to be recommended.

You may feel that your disabled child already receives means-tested benefits and so doesn’t require anything else. The state may take a different view, however, and it leaves your estate open to a claim being made under the Inheritance (Provision for Family and Dependants) Act 1975 for reasonable financial provision to be made from the estate for your disabled child. This would be costly and not in the best interests of anyone. It is always best to make some provision for a disabled child, rather than to leave them out of the will altogether.

Some other considerations

When giving instructions for your will, you should give special thought to the choice of trustees and guardians for your child, as they will have onerous duties and responsibilities after you have died.

You should also think about where the child will live and what practical arrangements will need to be in place. If they are to remain at home, your other children may have to wait a long time for their inheritance until after your disabled child has died and the property has been sold.

Finally, it should be noted that you can set up a trust to benefit your disabled child in your lifetime, as well as by will. This enables grandparents and other close relatives to benefit your child either during their lifetime or by leaving gifts in their wills that can be added to the trust for your child.

This is a complicated area of law, and if financial provision needs to be considered for your disabled child then it would be strongly recommended to take specialist advice from a qualified practitioner who will be able to discuss the family circumstances to ensure the right option is chosen.

Patricia Wass TEP

What is a disabled person’s trust?

Posted on By admin

Some trusts for disabled people are able to get special tax treatment from HMRC. They are more usually referred to as ‘vulnerable beneficiary trusts’.

For the trust to qualify as a vulnerable beneficiary trust, various conditions will apply.

Vulnerable beneficiary trusts for children are often set up in a parent’s will, but they are able to set up in lifetime as well.

Who qualifies for a vulnerable beneficiary trust?

The beneficiary of such a trust must be a disabled person. For this purpose a disabled person is one who:

  • by reason of ‘mental disorder’, within the meaning of the Mental Health Act 1983, is incapable of administering their property or managing their affairs, or
  • qualifies under a ‘benefits’ test, i.e.
    • is in receipt of an increased allowance, or
    • is in receipt of attendance allowance, or
    • is in receipt of the care component of disability living allowance at the highest or middle rate, or the mobility component of disability living allowance at the higher rate, or
    • is in receipt of the personal independence payment, or
    • is in receipt of an armed forced independent payment.

What classes as a ‘mental disorder’?

It should be noted that ‘mental disorder’ referred to above also has conditions attached to it. It is understood that HMRC will accept certain conditions as a ‘mental disorder’ that enable a person to qualify, and as a result of the condition they are incapable of managing their affairs. The accepted conditions are as follows:

  • Alzheimer’s or other forms of dementia;
  • bipolar disorder, schizophrenia, depression, or other mental illness;
  • Autistic Spectrum Disorder (sometimes described as a persuasive developmental disorder);
  • a learning disability, such as Down’s Syndrome.

Some brain injuries are not seen as a mental disorder if they only have physical consequences. However, if the brain injury has caused a psychological, cognitive or behavioural disorder, then these will generally be accepted as a ‘mental disorder’.

What about other beneficiaries?

If there are beneficiaries in the trust who are not vulnerable then the assets and income for the vulnerable beneficiary must be identified and kept separate. They must only be used for that person. It is only that part of the trust that would be entitled to special tax treatment.

How does the special tax treatment work?

If the trustees of the vulnerable beneficiary trust wish to claim the special tax treatment for income tax and capital gains tax purposes, they will have to complete the ‘Vulnerable Person Election Form VPE1’. A separate form will be required for each vulnerable beneficiary. The trustees and the beneficiary must both sign the form.

The election for special tax treatment is made for a tax year or part of a tax year (for example if the beneficiary has just become a vulnerable person). It has to be made within 12 months of the normal filing date for the trust tax return. It will come to an end if the beneficiary ceases to be vulnerable; the trust is terminated; or the beneficiary dies. The trustees would be required to report these circumstances to HMRC.

Income tax

For income tax purposes, the trustees are entitled to a deduction. They need to work out what tax they would be paying on the income of the trust if there was no vulnerable person. They then work out what tax the vulnerable person would have paid if the trust income had been paid directly to them as an individual. The difference between the two figures can then be claimed as a deduction from the income tax liability of the trust. There are variations on computing the relief from income tax and from capital gains tax depending on whether the beneficiary is UK resident or non-resident. Competent professional advice from a qualified advisor should be sought to assist in carrying out the various computations.

Capital gains tax

There are also special rules for capital gains tax. This is usually paid when assets are sold, given away, exchanged or transferred in some other way and their value has increased since they were put into the trust. There is an annual exempt amount allowed for the trustees to set against capital gains in the trust. As with the income tax calculations for these trusts, there is a similar calculation done for claiming a deduction in capital gains tax. The trustees work out what they would pay without any deduction. They then work out what the vulnerable person would pay if the gains had come directly to him. They are allowed to claim the difference as a reduction on what the trustees would have to pay by filling in a form.

Inheritance tax

For inheritance tax purposes there are also some special tax treatments. There is no charge if the person who sets up the trust survives for seven years from the date they set it up and there is no charge on transfers made out of a trust to the vulnerable beneficiary. It should also be noted that trusts usually have a ten-yearly inheritance tax charge, but trusts with vulnerable beneficiaries are exempt.

For inheritance tax purposes only, a ‘disabled person’ also includes a person who settles their own property into a trust for themselves at a time when they have a condition that it is reasonable to expect will lead to them becoming incapable of administering their property or managing their affairs (this can often happen for someone who may have an acquired brain injury as a result of an accident).

Get advice

If a vulnerable beneficiary trust is to be contemplated, then it is recommended that an advisor who is skilled in the law of taxation and trusts, such as a TEP, is engaged as the tax treatment, in particular, is fraught with technical difficulty.

Patricia Wass TEP