I’ve a disabled son – what can I do to ensure he will get an inheritance?

I have a disabled child and was wondering what steps I should take in the event of my death. (I hope not to die soon but always need to think about it). 

I don’t think he will be able to work and want to give him a comfortable life if I do pass. I’m separated from his mum.

I plan to leave a house and savings. I have a new partner and plan to get a house together (not sell my older home as it’s where my son lives with my ex).

Are there ways to allow him to benefit from an inheritance but not to spend it all from a young age once he reaches 18?

Do savings accounts make it worse for him if he needs benefits? Would it be better in a pension than savings? I know I will not be around when he could claim that.

Are there financial charities that can help him? P.H, via email

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Harvey Dorset, of This is Money, replies: It is great to hear you are taking the time to make preparations for your son’s future.

While so many other parents will feel similarly inclined to ensure that their children are left an inheritance when they die, it is understandable why this is so important to your given your son’s circumstances.

Undeniably, your son’s disability means that planning for his future will be more difficult, as you have to contend with the possible loss of some benefits if you leave him money, as well as issues like whether he is able to manage his money himself.

As a result of this, you may need to make use of a trust, as discussed below, in order to ensure that his eligibility for certain benefits is not thrown into question.

The good news is that you do have something to leave him, and with some care you will be able to guarantee that he can benefit from it in the future,

This is Money spoke to two financial advisers, one of whom specialises in financial planning for parents of children with special educational needs and disabilities, in order to find out what you need to do to ensure your son gets what he needs in the future.

Rhiannon Gogh, Director of SJP partner practice, Planit Financial Future, replies: This can be a hard subject to face, so firstly, well done for tackling it.

Before we start, there are three key challenges when planning for a child with vulnerabilities, which are essential to understand. 

Firstly, someone with additional needs or disabilities may struggle to access their inheritance, especially if they are unable to make their own decisions.

Secondly, leaving money directly to someone with vulnerabilities may only make them more vulnerable – speaking from experience, my son certainly wouldn’t understand if he was being taken advantage of.

Lastly, an inheritance left directly to a vulnerable individual may jeopardise whatever means-tested care, benefits or support they may already rely on. 

Therefore, whatever planning you implement needs to provide safe access to the funds and, of course, not leave your son worse off if he cannot work.

I suggest first looking at how your will can be used to protect your son from these challenges. 

However, in your individual situation, a ‘normal’ will won’t cut it. I’d recommend approaching a specialist solicitor to arrange a will with a trust. This means that rather than leaving money directly to your son, his inheritance could be protected using a trust written into your will.

A trust is a legal arrangement allowing someone, the trustee, to hold money on behalf of someone else, the beneficiary. 

Your Trustees act like ‘gatekeepers’ safeguard the trust fund and would ensure monies are protected for your son only. The trustees could monitor spending, acting as a check and balance.

Crucially, assets held in trust should not impact any means-tested benefits he receives. 

Appointing a solicitor experienced in trusts to protect the vulnerable is imperative. 

The will includes your choice of guardians to care for your son if both parents die before he reaches 18, and your solicitor could also advise you on how to help your son with financial decision-making in adulthood.

Alongside the trust, you should leave a ‘Letter of Wishes’. 

This is a non-legally binding private letter to your trustees explaining why you set the trust up and how it should be used (or not!). You can include wishes regarding future care or living arrangements for example.

You might also consider setting up a life insurance policy on your own life to pay a sum into trust for your son should you die. 

This often-overlooked tool may prove an affordable way of creating a protected legacy for him.

At 18, any savings or money in a young person’s name are included in means-tested benefits assessments. 

A sum of as little as £6,000 impacts eligibility for some benefits. 

A personal pension, however, isn’t usually included until the state retirement age. While rules and regulations can change, you should consider whether a pension would fit his circumstances generally rather than just its impact on benefits.

There are some fantastic charities you can look to for support. Your local Parent Carer Forum may offer courses around wills and trusts, a forum that I’ve run courses with throughout the years. 

The charity Contact provides support for families with disabled children. 

Finally, Mencap Trust Company helps parents arrange trusts for vulnerable dependants, offers professional trustee services and can recommend trusted solicitors.

Daniel Hough, financial planner at RBC Brewin Dolphin replies: You may have a small inheritance tax liability at present. 

Assuming no Partially Exempt Transfers (PETs) have been made in the last seven years, you will be entitled to your full nil rate band of £325,000. 

In addition, as you own your own house and have a direct descendant, you are entitled to a residence nil rate band of up to £175,000, capped at the value of your portion of the home ownership.

This means you have a total allowance of £500,000 as you are not married. 

Your inheritable tax assets are circa £550,000 and under current legislation exclude your pension arrangements.

There is an ongoing consultation outlining the changes to pensions, that from 6 April 2027 will be part of the inheritance tax regime. 

This consultation is due to finish on the 22 January 2025, so it could be best to wait until this is finished so that it’s fully understood how these assets will form part of the inheritance tax calculation.

With you continuing to work, your wealth will continue to accumulate, thus increasing the potential inheritance tax burden.

Your intention is to leave your house to your child to live in and you plan on buying a new house with your new partner. 

To purchase this new house, you may need to raise capital from your Isa portfolio, or if appropriate access some of your tax-free cash from your pension. 

Depending on the house you are looking to buy, you may need to take on a mortgage, so be mindful when working through your budget and affordability checks.

If you are planning to purchase a house through your tax-free cash or ‘lump sum allowance’, this will remove money from a current IHT exempt product and place these assets into your estate, under current legislation.

When thinking of setting aside funds for the future provisions of your child, you may want to consider a bare trust. 

A bare trust might be appropriate to place money as a lump sum for the absolute benefit of your child for future use. 

You explained that given the nature of their disability it is unlikely they will ever be able to earn a living, so the more that can be set aside now the better.

Further top-ups are permitted, and this is a good start for the seven year gifting rule for the asset to be completely exempt from inheritance tax. 

You will be known as the settlor and in your role as trustee, you will be able to control the nature of the capital or income payments out of the trust for your child’s benefit.

If considering this route, please always make sure that you have enough of a contingency fund to call upon, six months of essential outgoing is generally a good rule of thumb. 

You may have this capital available, but some might already be earmarked for your upcoming new home purchase.

Finally, I would ensure, as a parent, that you have a will and power of attorney (POA) that reflects your current wishes. 

This is particularly important for blended families so you can ensure that your wealth is passed on in line with your wishes.