To think that parents cannot leave money to severely disabled offspring free of IHT

[Noras]

Frankly I have been quite upset about farmers kicking up a fuss about IHT when they can transfer 3 million pounds of wealth IHT free and after that it only costs 20% which can be paid over a decade interest free.

As a parent of a disabled adult child I can only transfer one million pounds like anyone else and any unpaid IHT has to be paid over 10 years with 7% interest due.

We have other kids and can’t exclude them from our wills so that eats into the IHT allowance.

My son will struggle to work in any form of paid job.

I was discussing his placement in supported living with a social worker yesterday as a pretty likely destination

His life will inevitably be one of benefits eg universal credit and PIP

We have left % more to him due to his profound needs.

Our combined estate will face IHT charges especially with the fiscal drag.

So through no fault of my son he will live in relative poverty except for what is left after IHT into a vulnerable persons trust.

My son is used to nicer things eg holidays/ clothes etc and has some awareness of his current nicer life style even if he is not that driven by material things.

We would have to deprive ourselves of a decent retirement to ensure he is decently provided for,

I am heart broken to have given birth to someone who will live in relative poverty assuming he has a long life and the monies inherited have to cover say 45/50 years.

I am not the only parent waking up at 3am in fear of their kid’s future it’s a well known thing about parents of kids with disability.

AIBU to think that the Government should allow an IHT allowance for dependants who are classed as high needs eg PIP high or mid levels eg not really able to live independently etc? I can’t believe that they make no allowance in IHT terms for the disabled. As it is his care and needs have been an additional expense to us throughout his life eg 1:1 swimming lessons ,Ed Psych reports, SALT, private OT , personal trainers etc. This always exceeds disability benefits.

I also have a severely disabled teenager who will never be able to work, I’m not worried about his future because I know the state will provide for him. I know similarly disabled adults who are solely reliant on the state and they live good lives and have lots of opportunities provided for them. So I think the OP is catastrophising a fair bit.
I’m more worried for myself tbh, by the time he is an adult I will have spent 20+ years out of the work place caring for him. None of it’s ideal but there hasn’t been any other choice.

OP, I am so sorry for the situation you find yourself in. My child is mildly disabled so we hope he will be able to work in adulthood- it must be terrifying to think otherwise.

I would support a campaign on this issue.

Yes exactly, or the state would pick up the tab anyway. It saves money, quite apart from the human aspect.

I bet there are loads more disabled adults in this position than there are estates affected by ending the agricultural IHT relief.

I have some sympathy for your position, but what about the disabled people who don't inherit anything from their parents? They also haven't done anything to deserve that situation.
So, on balance, I'd rather increase the amount of inheritance tax that wealthier families pay and increase state support for all disabled people. Including those who are unlucky enough to have parents that wouldn't ever be able to provide for them.
Even after inheritance tax, your ds will still be better off than the vast majority of disabled people.

I agree with this tbh. You want an exemption from IHT to people in your DS’s position, but that would simply further widen the gap between him and all the people with similar (or more severe) needs who will have no such fund behind them.

It would also open up a load of undesirable unintended consequences - we’d have parents trying to prove their child is sufficiently disabled to qualify for such an IHT exemption - leaving everything to the disabled child simply because it won’t be taxed - etc.

As PP says your child will already be far better off than the majority.

Also this has nothing to do with farmers. I don’t necessarily support the farmers’ exemption either but the two are not related, well no more than any two other tax rules are related.

Bringing farmers into this is a false equivalency. The issue there is that the asset value of the land may be high, but those assets are needed for the business to function.

As for your own situation, consult a FA for your best approach. Good luck.

I am probably grumpy this morning I usually have more empathy. I think other people have expressed my thoughts better. If we don’t have IT would it be better that the wealthy are not entitled to benefits at all? My dad was disabled. He was on disability benefits and so was not able to have any inheritance as he was on benefits. My Mum worked all her life and has dementia . She is now in a care home and all her money bar £ 25 pound a week pocket money pays for a very basic care home. We all have to suck things up sometimes .Life seems unfair a lot of the time and society is becoming more individualistic.

Not sure if it has been mentioned but you should look into adding a clause into your will so that the money is placed in a Trust for a Vulnerable Benificiary.

This means the money can not be taken into account for any means tested benefits.

I don’t agree with inheritance tax full stop. It penalises those that have worked hard to pass something on to their children. However in a choice between taxing you and a farmer it will be you I’m afraid

No, it doesn't. It penalises those who hoard their wealth and don't spread it around ahead of time.

The one scenario where I do think it needs reform is where there are dependent children (which could be disabled adults).

If you don't want to pay it, give it to your kids earlier on in your life.

I feel sorry for your other children who are being left out of the will just so your disabled son can carry on having nice holidays and clothes.

This - In my experience individuals who have inherited money don't actually live better than those who are on benefits and care packages.

I suspect she trying provide for her future, however there is no guarantee he will get nice holiday and clothes.

Whatever the right way to handle inheritance tax, some people do seem to be worryingly callous to adults with disabilities and their families! I feel for op and parents like her. It's a very hard and stressful situation to be in. To be constantly worrying about what will happen to your grown up children when you die before them.

It’s about perspective for me.

I understand OP means relative poverty, compared to his life now, but still.

Lots of parents of disabled children worry for their future, but there are many that won’t inherit a large sum of money and won’t just end up going in the bin.

Even with IHT, her leaving a sum of money will still be a benefit that other disabled children/adults don’t get. If we did have money to leave, I’d just factor the tax into that and plan for what will be left, it’s better than the nothing we are like to be able to leave.

If it were invested with a 3% return and you wanted 50% of the return to be retained as captital it would be £350 a month as income.
It wouldn’t pay for that much I guess. How much do you need to cover care/support for a lifetime & does anyone outside the super wealthy have the money to fund it?

OP, NOBODY chooses to be disabled.

No government has EVER given a crap about the people, they only care about their own power, money and lifestyle.

Many disabled people live in poverty. Your son is privileged compared to 99% of the people on this planet (I am bedbound and reliant on inadequate carers, so I am not coming from a place of no understanding). It all sucks, but there’s very little any of us can do about it, all you can do is the best for your son - live in a house that he can manage in when he is on his own, or ask his siblings if he can live with one of them in later years so he has a secure home. Financial advisor for everything else.

I built in inflation to my assessment.

This, to be honest. Most families of disabled people are not paying for their care (see my post above where I worked at a place that cost over 100k a year per resident to run).

Would you rather we pay for this kind of thing through taxation, or that it was only available to those who can fund it themselves? And if so, what happens to those that can't?

If you agree that tax should fund these services, but don't like IHT, how would you suggest we raise the shortfall?

The figures you are calculating are not 'over benefits' but instead of benefits as the inheritance will render him ineligible for all but PIP. He will live on the money you leave for several years until he has spent it down to the UC threshold figure, saving the public purse. For this reason I don't think YABU. Your money is not going to add to the wealth of the already wealthy, it is preventing your son being as reliant on the state as he would otherwise be. So unless the IHT comes to more than the cost in benefits, it would be cost effective to make an exemption in situations like yours.

Life insurance might be a good option for you if you're young enough and in good enough health for it to be affordable. If the policy is written into trust it should still pass to him exempt from IHT. You could look at policies that reduce the payout over time, so he gets less if you die when he's older (and therefore potentially needs less due to lower remaining life expectancy). Remember that he'll get some form of state pension or pension credit at retirement age too. Best to speak to an IFA to understand your options here.

I'm afraid I don't have much sympathy.

1.2 million unpaid carers across the UK are living in poverty, with 1 in 10 of all carers in deep poverty. Very few people with disabled children will have anywhere near the inheritance tax threshold to pass on to them. Unless a miracle happens my disabled sons won't get much, and as I'm stuck on part time work and underemployed due to my carer role I'm facing an incredibly poor retirement too.

I think that disability benefits should be higher in a lot of cases and more done to support carers. But why should disabled people get benefits and also tax free inheritance. Makes no sense. Better to keep the tax in place and use the money to increase all disabled people and carer welfare.

The money will go into a vulnerable persons trust and there is no claw back from benefits for him as he has no control of the money what so ever.

I will probably also do a life insurance bond on my other kids lives in his favour which will end when they die but in meantime can be drawn down in small amounts to use for him.

I have more sympathy with you than all the rich landowners campaigning for special status.

You definitely need proper advice from a qualified and specialist accountant.

For example you can use a discretionary trust for a severely disabled person in order to provide discretionary payments for eg care and therapy without it impacting on what they ‘own’. It’s a particular kind of trust used in very specific circumstances.

So your OP is actually incorrect and really if you’re considering leaving vast amounts of money to a very vulnerable person you need proper advice to prevent them being taken advantage of and to ensure that they are able to receive care provided by the local authority etc.

Check out Mencap. They have webinars on this subject, with advice from solicitors who know this stuff. You need to set up a trust so it doesn't affect any benefits that he might be entitled to.

Thanks. I do have an interest in tax and estate planning.

Here goes.

Standard discretionary trusts are useful but not in this instance as they occur I believe an automatic 20% IHT charge in and thereafter a regular charge every 10 years of 10% value.

Vulnerable persons trusts do not attract the every 10 year charge ( See below the trust)
However they will attract IHT on death or act as a PET if made during life ( so you have to live 7 years)

We had a solicitor draw up wills, I also have a financial adviser etc.

As it is a decade or more ago there were reliefs from eg CGT and maybe IHT for assets paid into the equivalent disabled trust but these were removed ( with no fanfare or big demonstration in London)

Gov Website re the Trusts

Trusts for vulnerable people
Some trusts for disabled people or children get special tax treatment. These are called 'trusts for vulnerable beneficiaries'
Who qualifies as a vulnerable beneficiary
A vulnerable beneficiary is either someone under 18 whose parent has died or a disabled person who is eligible for any of the following benefits (even if they do not receive them):

• Adult Disability Payment
• Armed Forces Independence Payment
• Attendance Allowance
• Child Disability Payment
• Constant Attendance Allowance
• Disability Living Allowance for adults or
• Disability Living Allowance for children (either the care component at the highest or middle rate, or the mobility component at the higher rate)
• Industrial Injuries Disablement Benefit
• Pension Age Disability Payment
• Personal Independence Payment

A vulnerable beneficiary can also be someone who is unable to manage their own affairs because of a mental health condition - check with a medical professional that it's covered by 8 www.gov.uk