Normally people bequeath their assets to their children by way of a Will. Some, however, use a Trust to do so.
Sometime back I had written a blog 'Will vs Trust' highlighting the differences between two.
However, when it comes to the matter of a special child, a combination of the two may be a useful solution.
First things first...children with special needs may not be able to manage their financial affairs when they grow up. Therefore, people desire to put an appropriate system in place that will secure such children's future in their absence. Whatever that system or legal structure may be, the more important issue is to find reliable person(s) to manage the financial affairs. Therefore, this has to be the primary focus...sibling, relative, friend or a professional...it has to be someone who is likely to outlive the child.
As for the structure, a simple Will may not be a completely safe option. Despite being the legal owner of the assets, the child would have to depend on someone to manage them. This can be risky if the guardian does not remain honest.
To provide a more comprehensive and legal protection, it may be better if the assets are owned by a Trust with the child as the beneficiary, instead of child being the direct owner.
But there could be a few issues with a Trust.
You cannot pull out an asset that you have put into a Trust. As such if your total corpus is not very large, there could be a problem if later you suddenly require some money during your spouse's or your lifetime. (Trust during lifetime is Ok for ultra HNIs whose wealth run into many crores.) Therefore, it may, prima facie, be better if you/your spouse continue to be the owners of your assets and have access to it till your/your spouse's lifetime. [Alternatively, a revocable trust can also be considered. But that has different tax implications vis-a-vis an irrevocable trust.]
Moreover, transfer of property to a Trust is likely to attract stamp duty whereas this is generally exempt when transferred after death through a Will.
Therefore, if one makes a Will to create a Trust after his and his spouse's lifetime, it could combine best of the both the options.
Since this, especially formation of a Trust, is an important legal matter it would be best to retain the services of a lawyer to put this structure in place.
Sometime back I had written a blog 'Will vs Trust' highlighting the differences between two.
However, when it comes to the matter of a special child, a combination of the two may be a useful solution.
First things first...children with special needs may not be able to manage their financial affairs when they grow up. Therefore, people desire to put an appropriate system in place that will secure such children's future in their absence. Whatever that system or legal structure may be, the more important issue is to find reliable person(s) to manage the financial affairs. Therefore, this has to be the primary focus...sibling, relative, friend or a professional...it has to be someone who is likely to outlive the child.
As for the structure, a simple Will may not be a completely safe option. Despite being the legal owner of the assets, the child would have to depend on someone to manage them. This can be risky if the guardian does not remain honest.
To provide a more comprehensive and legal protection, it may be better if the assets are owned by a Trust with the child as the beneficiary, instead of child being the direct owner.
But there could be a few issues with a Trust.
You cannot pull out an asset that you have put into a Trust. As such if your total corpus is not very large, there could be a problem if later you suddenly require some money during your spouse's or your lifetime. (Trust during lifetime is Ok for ultra HNIs whose wealth run into many crores.) Therefore, it may, prima facie, be better if you/your spouse continue to be the owners of your assets and have access to it till your/your spouse's lifetime. [Alternatively, a revocable trust can also be considered. But that has different tax implications vis-a-vis an irrevocable trust.]
Moreover, transfer of property to a Trust is likely to attract stamp duty whereas this is generally exempt when transferred after death through a Will.
Therefore, if one makes a Will to create a Trust after his and his spouse's lifetime, it could combine best of the both the options.
Since this, especially formation of a Trust, is an important legal matter it would be best to retain the services of a lawyer to put this structure in place.
