Planning a Dependant's Future: Wills, Trusts and Family Pension

How parents can secure lifelong financial support for a child with a disability through wills, private trusts, insurance and family pension rules.

One of the biggest worries for parents of a child with a significant disability is: “What will happen after we are gone?” Careful planning can provide lifelong security.

Estimate lifetime needs

Start by estimating the child’s lifelong costs: living expenses, care, therapy, medical costs and housing, adjusted for inflation. Subtract expected income from pensions and benefits. The gap shows how much needs to be built up.

Write a will

A will decides who inherits property and money. Parents should:

Clearly state how assets should be used for the child.
Name a guardian and trustees.
Avoid leaving large sums directly to a child who cannot manage money, which may cause problems or be misused.

Set up a private trust

A private trust is often recommended:

Parents transfer money or property to the trust during their lifetime or through their will.
Trustees, trusted relatives, friends or professionals, manage the assets.
The trust deed specifies that income is used for the child’s care throughout their life.
After the child’s death, remaining assets pass to others named in the deed, such as siblings or a charity.

Lawyers can draft trust deeds. The costs are modest compared with the security provided.

Life insurance

A term life insurance policy on the parents can provide a lump sum to fund the trust if a parent dies early.

Family pension

For central government employees and many state and public sector employees, a child with a disability who cannot earn a living can receive a family pension for life after the parents’ deaths. Parents should make sure the child’s details are registered in pension records.

A letter of intent

Many families write a letter of intent, a non-legal document describing the child’s routines, preferences, medical needs and important contacts, to guide future carers.

Building a safety net

Parents of a daughter with an intellectual disability set up a private trust with her aunt and a family friend as trustees. They buy a term insurance policy, write wills leaving their flat to the trust, register their daughter for family pension, and write a detailed letter of intent. They feel far more secure about her future.

Thinking planning can wait until parents are older

Unexpected events can happen at any age. Starting early gives more time to save and ensures arrangements are in place if something happens suddenly.

Key takeaways

Estimate lifelong costs and income to find the gap.
Wills and private trusts ensure assets are used for the child's care.
Term insurance can fund the trust if a parent dies early.
Government family pensions can continue for life for a child with a disability.