Sarah, 80, who cares for her son Wayne, 45, born with Down syndrome, was recently diagnosed with cancer. Sarah is quite financially stable but has been so busy in life she has not put into place plans for the future which would allow for her family to make decisions for her should she not be capable of making her own decisions.
Sarah was aware that she needed to ensure Wayne’s security as a priority. She also wanted to be fair to her other two children, Warren and Jenny, even though they are both married with children and earning high incomes. Sarah trusted that Warren and Jenny would ensure Wayne was cared for, but as Wayne did not have capacity to execute legal documents, she needed to seek legal advice.
Sarah saw her legal adviser, Ben, who advised she needed to put into place a Will, a Power of Attorney, and also Medical Guardianship. He also advised Sarah that she could set up a testamentary trust for Wayne in her Will and appoint Warren and Jenny as trustees. This effectively would enable Warren and Jenny to handle Wayne’s inheritance on his behalf and enable them to ensure the home Wayne moved into was suitable for his needs. They would also be responsible for his ongoing financial needs.
If someone does not have capacity to handle their own financial matters, setting up a testamentary trust for their share of an inheritance is the only way to ensure the family is able to handle their affairs. If the inheritance is left directly to the disadvantaged child, the family runs the risk of the government being appointed to handle that person’s financial affairs, or alternatively the family must apply to the Guardianship Tribunal to be appointed.
A testamentary trust is a trust created under a Will and therefore has no effect until after the testator (person making the Will) has died. There are a number of different types of trusts. Some examples are disability trusts and even more flexible special needs trusts. A special needs trust allows a trustee to apply income and/or capital to provide for a beneficiary’s maintenance, advancement, education and benefit during their lifetime and also for their general wellbeing which would include accommodation, nursing, home help, maintenance and other incidental expenses during the beneficiary’s lifetime.