The midnight oil is being burned at the Minister for Finance's office as staff pour through public submissions sent in for consideration in December's Budget. Family Money gets its share of submissions as well, always from ordinary readers who don't think their requests will get much of an airing on Merrion Square. "As a parent of an adult disabled person I think it is iniquitous that money put aside for a disabled person is assessed when determining whether they should be liable to receive a medical card and the Disability Allowance," writes Mr B from south Dublin, who would like to make over a deed of covenant to his child, who does not work, to provide her with some additional income and allow him some modest tax relief.
"It would be of comfort to parents to be able to provide something for the dependent person, however modest, without the worry of their State benefits being eroded or cancelled. One of our greatest concerns is what will happen to her when we die.
"I believe parents/guardians of disabled people should be allowed from the time they are children, to accumulate funds on a tax-exempt basis similar to the treatment afforded to an approved pension scheme. Not only would the `pension' income be of tremendous benefit to the disabled person as an adult, but a source of great comfort to the parent and indirectly assist the inadequate level of State funding."
Mr B's idea of a parent being able to contribute to a pension fund for their disabled adult child, has considerable merit, says Mr Brian Bohan, a tax specialist and lawyer who has advised many clients with disabled children over the years. Their greatest concern is always their child's long-term financial security, he says. Unfortunately, some hope their child will die before them, so that they will not be alone and destitute if the parents died first.
"There are bits and pieces of legislation and tax regulations, which if all brought together would certainly be of benefit to some disabled people," says Mr Bohan. "But what is needed is caring legislation."
For example, under current Capital Acquisition Tax (CAT) regulations a parent can contribute funds to defray a child's ongoing medical expenses and this money is tax-exempt. Parents, of course, can help children during their lifetime with reasonable living expenses, but this is no help if this financial assistance - even in the form of a Covenant - affects the child's means-tested benefits or medical card. As a result of the Dunne vs National Maternity Hospital case, awards to accident or injury victims can be invested in tax-exempt funds and the income is tax exempt, says Mr Bohan, "but only if it is the main income. This section, Section 189 of the Taxes Consolidation Act 1997, has been used for the victims of hepatitis C as well, although the income in many of these cases is being taxed at the moment because it is not the main income at the moment."
None of these tax concessions is of much help to our reader, a father with a modest income who cannot give his daughter, who is in her twenties, some additional funds without her losing her benefits. Had he been able to make regular monthly contributions into a tax exempt, pension-type investment fund, from the time she was a small child to when she became an adult and wanted to live a more independent life, it would have resulted in him receiving some tax relief on the contributions. This would have provided his daughter with her own independent income on which she would have expected to pay tax, but which may or may not have resulted in her losing her other benefits.
The attraction of a solution like this is that sufficient investment growth can accumulate over a 20- or 25-year period to provide a disabled person with a fairly reasonable income for life. A £100 a month contribution, growing at an average return of 9 per cent per annum and indexed at 5 per cent should produce an investment fund of nearly £80,000.
An annuity would need to be purchased that would reflect the person's age, state of health and projected lifespan, but even at a modest 7 per cent, could return an annual income of £5,600.
At present, parents are reduced to taking out long-term life insurance policies and savings plans, and to make provisions in their retirement contracts to provide their dependent disabled children with some kind of income.
In the case of conventional savings plans, the funds are not taxexempt, although the benefits are. Unfortunately, the benefits are only payable upon the death of the parent - and often when the "child" is now middle-aged.
