Planning for the future

John Costello & Eugene F. Collins, Solicitors

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Why make a Will?

If you are married and die without making a Will, leaving a spouse and children, your spouse inherits two-thirds of all you own (called ‘your estate’) and your children inherit the remaining one-third. If the family home is solely in your name, your children could ask for one-third of its value, leaving financial problems for your surviving spouse. If you are single and die intestate, your estate is distributed among your next of kin, as set out in the Succession Act 1965.

By making a Will, you can avoid these problems. In particular, a Will can be used to set up a trust for the protection of a beneficiary who may have a drink problem, a gambling problem, is irresponsible when it comes to money, or who may suffer from a mental disability.

Executors

In every Will, an executor has to be appointed to carry out the wishes stated in the Will. The executor must pay all the debts and liabilities that arise up to the date of death and that arise during the administration of the estate. If the Will is very simple, one person could be appointed to act alone (e.g. your spouse), but it is usually better to appoint at least two people.

Trustees

You may not wish your children to receive money directly, but may wish to put a sum of money in a Trust for them until they reach the age of 18 or older. You may also wish to remember a child or beneficiary who has a disability. You therefore need to appoint Trustees (who can also be executors) who would hold the benefit on trust for the beneficiary until the beneficiary attains the age specified in the Will, or for the lifetime of the beneficiary, whichever is specified in the Will.

Advantages of a Discretionary Trust for a beneficiary with a learning disability

A beneficiary with a learning disability is not legally permitted to receive an inheritance of money or property unless they have the legal capacity to manage their legal and financial affairs in their own right. If a person with a learning disability inherits money or property directly, and they are not able to manage their legal or financial affairs, they would have to be made a Ward of Court. A Ward of Court is a person who is declared to be of unsound mind and incapable of managing his/her person or property. After the appropriate medical evidence is received by the Court, a committee is appointed by the Court to manage the Ward’s personal and financial affairs. The committee is normally one or more close relations or friends. In this event, the property of the Ward is not transferred into the committee’s name, but is invested by the Wards of Court Office on behalf of the Ward. The committee would then have to apply to the Court to receive monies on behalf of the Ward or to obtain monies from the Court to pay outgoings or purchase items for the Ward’s benefit.

If the beneficiary with the learning disability receives their inheritance in a Discretionary Trust, they do not have to be made a Ward of Court. Another advantage of a Discretionary Trust is that the monies or property in a Discretionary Trust are not means tested. Therefore a beneficiary in a Discretionary Trust can receive distributions from the Trust Fund which do not affect the rights of the beneficiary to receive their full Disability Allowance from the State. On the other hand, if the beneficiary received monies or property directly, without a trust, then that distribution would be means tested and the beneficiary might lose their Disability Allowance or have it reduced substantially.

Structure of Discretionary Trusts

A Discretionary Trust can be set up during a person’s lifetime or under a Will. Normally where parents are leaving a sum of money or a property on trust for a child with a disability there is no advantage in setting up such a trust during their lifetime and the trust can be set up under a Will. In this situation the parents appoint at least two Trustees, as two Trustees are normally required to sell a property. The Trust usually arises on the death of the second parent and the Trustees would normally be siblings of the beneficiary. However, it is sometimes useful to have an independent Trustee (i.e. an uncle or aunt or family friend) who could act as a Trustee with siblings.

The usual wording in the Will creating a Discretionary Trust is that the Trustees are given authority to make ‘payments to or for the benefit of the beneficiary in such amounts and at such times as the Trustees think fit’. So, for example, if the beneficiary needs personal items or wishes to go on a holiday, the Trust Fund can be used.

It is also imperative that it is specified in the Will what is to happen to the Trust Fund on the death of the beneficiary. For example, the Will could specify that on the death of the beneficiary any undistributed part of the Trust Fund is divided equally between the other surviving children. Alternatively, some of the Trust Fund could be given to the charity organisation or institution caring for the beneficiary at the date of their death to help reimburse the carers for the cost of caring for that beneficiary.

Powers of Trustees

It is usual in the Will to give the Trustees a number of powers required to act as Trustees and to administer the Trust property. This would include, for example, giving them power to invest the Trust Fund as appropriate. In this regard, the Trustees would have to get appropriate professional advice before investing the Trust Fund. It is also useful to stipulate in the Will that the Trustees have power to use the Trust Fund for any accommodation needs of the beneficiary. The Trustees should also be given power to let out any property which might form part of the Trust Fund. Parents can also leave a letter of wishes with their Wills giving guidelines to the Trustees as to how they might use the Trust Fund for the beneficiary.

Appointment of Guardians

If you and your spouse were unfortunate enough to be killed in an accident leaving behind children under the age of 18 years, your relatives would have to apply to the Court to have guardians appointed for your children. This can be avoided by naming guardians in your Will. A guardian is the person you select to take over your role as parent in rearing your children under the age of 18 years. Therefore, the guardians have a different role from the Trustees who manage the fund or the property that is held for the benefit of the beneficiary. Nevertheless, guardians and Trustees may be the same persons. It is also very important that guardians are appointed for a child who may have a learning disability. However, it is unclear at present whether the law properly recognises guardians appointed in a Will for a beneficiary over the age of 18. Despite this legal uncertainty, guardians should be appointed for a child, of any age, with a learning disability.

Conclusion

This article is a very short summary of the basic structure required for a Will providing for a beneficiary with a learning disability. There are many other legal matters which might have to be determined in relation to such a Will, e.g. the rights of a surviving spouse, the rights of other surviving children, the family position if there is a legal separation or divorce and the rights of a surviving partner. There are also rights for children born outside marriage. In addition, there can be legal problems with joint bank accounts.

Finally, the whole question of Inheritance Tax would have to be examined carefully with every Will. In any event, it is imperative that if you have a child with a learning disability, you should obtain legal advice regarding the creation of a Discretionary Trust for that child in your Will.

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