Every parent wants to make some provisions for their children's future. When they are very young, they need to ensure that their life insurance provisions are adequate in order that the remaining parent or guardian has sufficient income to feed, cloth and educate the family. If the family budget stretches far enough, many parents put extra money away for third level or college education; many would like to be in a position to help a son or daughter buy his or her first car or contribute to a down payment on a starter home.
The parents of children with a disability, especially a severe learning disability, would love to be making such financial plans, but more often their concerns are about the well-being of their child over a much longer term. Any money they have to give or leave their children will have to last a lifetime.
Their greatest fear is that there will be no one to take over the care of their child after their own deaths and that their son or daughter will be placed in an inappropriate institution, such as a psychiatric hospital or geriatric facility. The truth is that there are hundreds of handicapped adults in need of proper residential care and only a very limited number of places.
Family Money was told by a senior social worker that the precious few places in longcare residential centres (supported by the government as well as private or religious charities) are allocated according to need and cannot be "purchased". Assuming this grim situation continues, and there is little sign of any improvement on the horizon . parents need to make the right financial decisions as early as possible to ensure the best private or family care is available for their dependant child after they are no longer able to provide it themselves.
There are both legal and financial choices to be made. Legal advisers say that if your child is a minor, you need to make a proper will and appoint a guardian who will be legally responsible for the child's welfare until they turn 18, but who will ideally maintain this loco parentis relationship for a longer period.
The will should also contain a deed of trust which would name competent trustees, who may or may not also be guardians. The objective of the trust is to ensure the financial position of the child in both a competent and tax-efficient manner.
Without a carefully worded trust, says Mr Stephen Hamilton of the solicitor's firm, A & L Goodbody, a child may become the full owner of substantial funds with which he/she would not be competent to manage; also the parents' estate may be liable to inheritance tax which could otherwise be avoided or delayed.
"This is a very personal matter and where there is a disability, it is a large responsibility, so you must choose your guardians and trustees very carefully," said Mr Hamilton. "Whatever you do, don't just put someone's name down. Make sure you consult them and make sure they understand that they will be taking a lifetime trusteeship."
Where a family member/trustee's financial competency is questionable (more often than not the guardian/trustee is a close family member), a solicitor or accountant may also be named as a trustee with particular responsibility for the financial and tax aspects of the trust. Such an appointment will result in an annual charge against the trust. Any temptation to leave your entire estate to the handicapped child at the expense of other children who may be older and independent should be resisted. Aside from causing friction, it can lead to the disenfranchised sibling(s) applying to the court for a share of the estate under the provisions of the Succession Act. It is far better to try and get the other children to waive their inheritances in favour of the dependant child and, in the event of any surplus being left in the trust after the beneficiary's death, the funds can then be distributed to the remaining brothers and sisters.
When drawing up a will/trust, you need to take account of whether, as the absolute, rather than the potential beneficiary of a trust, the child may lose any means-tested maintenance allowances or other benefits like free travel, television, telephone and electricity allowances.
If the trustees have complete discretion on how the proceeds are paid or applied, the beneficiary has no absolute access to the trust funds and there are no "means" to be meanstested.
According to Mr Hamilton, in order that a trust becomes operational upon the death of a parent and the tax and trust reliefs are approved, parents should ensure that medical records are at hand. "The Revenue Commissioners can seek medical evidence. In the case of physical disability or a mental handicap like Down's Syndrome the condition may be obvious. But where an illness like schizophrenia is involved, it is essential to have medical records on file."
Where there is an older, dependant child, who has his/her established needs and preferences, the parent should also write a "letter of guidance" for the guardian and trustees. This can include their wishes (and the child's) on such matters as further education, sheltered or institutional care, medical care, access to spending money and even the sort of holiday they would like their child to have. Trusts don't have to last a lifetime. If the child has a physical handicap, the parent may wish for him/her to have control of the proceeds once he/she turns 21 or even older.
The best-case scenario involves sufficient funds to help an older sibling/trustee to take care of the disabled brother or sister for their lifetime, either in their own home or in an appropriate residence. But without a will and a deed of trust, intestacy laws come into effect and the child can become a Ward of Court and all financial and other decisions about their future is made by "Committee", the legal term used to describe the court-appointed guardian or trustee. And there isn't a parent alive who would want such a thing for their child.
