Making provision for your children’s money
For many parents, it is important to them that their children are all treated equally upon their death irrespective of the fact that they may have a disabled child or a child that cannot control their own inheritance. The central question that causes most people angst is what strategies do they need to implement to ensure that their child is adequately catered for, in light of the fact that they cannot adequately control their inheritance themselves. There are a number of strategies available to parents to implement in their Will which provides the perfect solution to this central question.
Child with an Inability to control their money
In instances where a child cannot control their inheritance due to substance or dependency addiction, spendthrift, influence or just a general inability to not be good with money, there are options available to you. One of the most common ways to make provision for that child’s inheritance is by making provision in your Will for your child’s inheritance to be paid to a Capital Protective Trust or Testamentary Trust. The Capital Protective Trust or Testamentary Trust is set up in accordance with the provisions of your Will and allows you to appoint a family member or other trusted person to control this Trust on behalf of your child during their lifetime. You may stipulate what the funds in the Capital Protective Trust or Testamentary Trust can be used for and can include accommodation (whether acquiring a property for them or paying rental accommodation), medical expenditure, medical insurance, rehabilitation costs, education, recreation, entertainment, expenditure on personal fittings and furniture, holiday travel and personal incidentals. Should you wish, your child may also receive an income from the Capital Protective Trust or Testamentary Trust, and this would need to be considered in light of any Centrelink or other government benefits that your child may receive. Capital Protective Trusts and Testamentary Trusts are helpful to parents who want to treat their children fairly but have concerns about them controlling their own inheritance. By creating this Trust for their child in their Will, they are ensuring that their child with dependency, spendthrift or other money issues will be adequately looked after.
Disabled Child
Caring for a severely disabled child is often a lifelong journey and one which creates stress for parents in how their disabled child will be cared for when they are no longer here. Often the familiarity and routine that your disabled child is used to is something that you wish to continue after your demise and may wish them to remain in the family home or within their community if possible. One of the most popular options available to parents with a disabled child is a Special Disability Trust. Similar to the trusts referred to above, this trust is created for the benefit of your disabled child, specifically to provide for their care and accommodation needs. It is a mechanism for parents to plan and provide for the care, accommodation, medical costs and other needs of a child with a severe disability during their lifetime. One of the favourable aspects of the Special Disability Trust is that the assessable assets of the Special Disability Trust of up to $781,250 (as at 1 July 2023) are exempt from the Centrelink assets test. In addition, should you wish to leave your family residence to your disabled child, it is deemed not to be an assessable asset and would not be included in the asset value link for Centrelink purposes. Withdrawals from the Special Disability Trust are restricted to care and accommodation needs together with discretionary spending up to $14,000 (as at 1 July 2023). Discretionary spending encompasses social inclusion workshops, clothing, recreation and leisure, household and personal items.
Special Disability Trusts are a good way to provide for the future financial needs of your disabled child provided that they meet the requirements and criteria for the establishment of such Trust. These requirements include that your child must have a severe disability, being a severe intellectual, psychiatric, physical or behavioural disability or medical condition. If your child does not meet the criteria for a Special Disability Trust there is also the option to put in place a Capital Protective Trust or Testamentary Trust, as discussed earlier in this article. It is important that you do not feel alone or isolated when determining how best to leave an inheritance to a disabled child or a child who cannot control their own inheritance.
With the appropriate advice and guidance you will be able to implement the appropriate strategies to put in place a Will that confirms your wishes, providing you with the peace of mind.