06.04.16

Question:

We’re looking at putting in place a Will. Our son, who has always lived with us, has additional needs. We want to leave the family home to him after we have died, it would be really helpful to understand any issues surrounding this?

Answer:

It is understandable why you would want to leave the family home to your child , but when that child has additional needs, a disability or is vulnerable in any way then doing so might not be quite so straightforward.  For example, leaving your child the house may impact their benefits, or indeed it may cause practical problems for them to live in the house unassisted.

Some of the issues that you need to consider are:

• Does the child have capacity to be a home owner?
• Is the child able to live in the home by themselves when you are not there to care for them? If not, what care package can be set up to care for them?
• Are they vulnerable? If so, what are the possible implications for living in the home without support?
• Who is going to pay the insurance and service bills, and where will money come from to pay these?
• What happens if anything breaks down? Are they, or the care team, able to deal with it?
• Are there better options to make sure that the child is protected, like assisted living or shared housing?
• What effect will this have on the child’s benefits now and in the future?

If you are thinking of leaving your house to your child, taking a long-term view is essential.  This means finding a solution that will ensure things are workable in the future, particularly as the personal circumstances of a child/adult with additional needs or disabilities may change over the course of time.  One option is to create a Trust and to put the property in this Trust.  In this situation there are two types of Trusts that are relevant: Discretionary Trusts and a Disabled Person’s Trust.

Discretionary Trusts and a Disabled Person’s Trust

A Discretionary Trust is extremely flexible, the named beneficiaries of this particular Trust do not have a fixed entitlement and so it is up the Trustees to decide the allocation of funds available. One of the advantages of a Discretionary Trust is that the money held in trust can’t be taken into consideration when assessing means-tested disability allowance.

A Disabled Person’s Trust (DPT) is also discretionary and is specifically for a disabled person. The main advantage of a DPT over a Discretionary Trust is the favourable tax treatment it receives for Inheritance Tax, Income Tax and Capital Gains Tax.

Putting in place one of these types of Trusts helps avoid some of the issues of ownership and, crucially, provides flexibility for change.  However, if you are thinking of placing a home in Trust then you would also need to put cash in the Trust to pay for things like insurance and bills.

We have assumed from your question that your son is an only child. However if you do have other children who will benefit from your estate when you die, you will need to consider the implications for them of leaving the family home for your son to live in after you die, as this will potentially delay your other child(ren) receiving their inheritance.

If you would like to discuss any of the issues raised in the Q&A please do not hesitate to contact us.