By Caroline Browne, Wills and Probate Unit, Holmes O'Malley Sexton Solicitors, Limerick and Dublin.
Parents of children with special needs will have to confront the difficult question of how best to ensure that their children are adequately provided for in the event of their own death. This is a particular worry for them, especially where adult children are concerned, and a matter that needs careful consideration.
Making a Will
The most important step in this regard is to make a will. Anyone who has acquired assets (assets may include property, such as a car, house, livestock, jewellery, shares or a savings account for instance) should consider making a will. A will provides for how your assets will be distributed on your death according to your wishes. A well drafted will also ensures that those whom you intend to benefit are provided for in the most effective and tax efficient way possible. Importantly, a will can also be used to put in place mechanisms to assist and provide for dependents, especially those with special needs. If you do not make a will the law dictates how your assets are distributed according to the rules of intestacy. The law is inflexible in this regard and will not take into account the special needs of individual family members.
If you have children under the age of eighteen years it is important to appoint legal guardians under your will. It is always advisable to discuss the situation with the proposed guardians in advance. Trustees should also be appointed over the inheritance to be taken by any child and it is often the case that the legal guardians also act as the trustees. It should be noted that if parents are unfortunate enough to be killed in an accident leaving behind children under eighteen years of age without naming guardians under a will, the relatives would have to apply to court to have guardians appointed.
Legacies and Bequests
Most parents would wish to leave a child with special needs a legacy under a will. However, this may not be the best option to ensure the child is adequately provided for and may create extra hardship and expense for the beneficiary. Why is this? Firstly, a legacy left directly to a special needs child may affect the beneficiary’s ability to rely on State benefits such as disability allowance. Secondly, the child may not be able to look after themselves or their affairs sufficiently and may be taken advantage of or even face the prospect of being made a Ward of Court. Thirdly, there may be tax considerations which may be better utilised through the use of a trust for instance.
A useful mechanism to ensure that family members with special needs are well looked after is the creation of a discretionary trust. A discretionary trust places the assets to be given to a beneficiary or class of beneficiaries in the hands of trustees and places a duty on them to distribute the assets subject to the trust for the benefit of the named beneficiary. A discretionary trust affords the trustees discretion as how best to manage the assets subject to the trust and how best to distribute property or funds to the beneficiaries depending on the circumstances.
Advantages of Discretionary Trusts
The advantage of this type of trust is that it affords the trustees flexibility in terms of maintaining and providing for the financial needs and supports of the family member, the beneficiary of the trust. This type of discretionary trust is sometimes referred to as a ‘special needs trust’ and is a means by which the welfare of a family member with an intellectual and/or physical disability can be provided for indirectly.
Discretionary trusts also have certain financial advantages, including tax advantages. For instance, as the beneficiaries of a discretionary trust are not immediately entitled to the inheritance, the assets subject to the trust are not taken into consideration for the purposes of means tested state benefits such as disability allowance, medical cards, free travel cards, etc. In addition, a tax exemption applies for discretionary trusts for the benefit of named individuals who are, because of age, improvidence or physical, mental or legal incapacity, incapable of managing their own affairs. However, to qualify for the exemption the trust must clearly identify the persons to benefit and state that the trust is exclusively for the maintenance and upkeep of the named beneficiary only.
In most cases, the persons looking to create the trust will write a letter of wishes for the trustees as a guide to how they would like the trust to be administered. It is also advisable that the will provides for the disposal of the remainder of the trust property/fund to residuary beneficiaries on the death of the named beneficiary.
Effects on rights of other siblings
Unlike a surviving spouse, there is no automatic legal right share afforded to children under a will. Irish succession law places a legal obligation on parents to make proper provision for their children in accordance with their means and the needs of the child. The courts have recognised that parents have a moral duty in this regard. That said, proper provision does not mean that children must be treated equally. It depends on the circumstances, the specific needs of the children, their position in life, financial standing and so on. However, a child that feels he has not been properly provided for under a will may apply to court for a determination as to whether the parent or parents concerned failed in their moral duty and for an order for proper provision.
Assistance in making a will
It is always advisable to obtain expert advice before considering drafting a will, especially a will that provides for guardians and trustees. As suggested, discretionary trusts are an excellent way of ensuring that loved ones with special needs are adequately provided for. The advice and experience of an experienced solicitor should always be sought when making a will or creating a trust fund to simplify the process and ensure, as far as practicable, that the child’s needs are met.
Please contact Caroline Browne in our Wills and Probate Unit and she will be happy to provide any further advice and assistance. You can also visit our website for further information www.homs.ie
Holmes O'Malley Sexton, Solicitors, Bishopsgate, Henry Street, Limerick, Tel: 061 313222
Also at 14 Hume Street, Dublin 2, Tel: 016768928
Disclaimer: the information herein is intended as a general guide only. No responsibility is accepted for errors or omissions howsoever arising. Specialist legal advice from a solicitor should be sought before taking any action in response to the issues raised in this article.