You want to leave something to your child. A safety net. Some security for when you’re gone. But if you leave it directly, it could make things worse.
A direct inheritance above £16,000 stops Universal Credit. Above £14,250, the local authority can charge for social care. Your child could lose more in benefits than they gain from the inheritance.
This isn’t a niche problem. It affects every SEND family that hasn’t planned for it.
Why direct inheritance is dangerous
Means-tested benefits have capital limits. If your child’s capital exceeds these thresholds, benefits reduce or stop entirely.
The key limits are: Universal Credit starts reducing tariff income at £6,000, stops entirely at £16,000. Local authority social care charges begin at £14,250 in England and apply fully from £23,250.
If your child is on Universal Credit and inherits £20,000 directly, UC stops. They lose the disabled child addition, the carer element (if someone claims Carer’s Allowance for them), and potentially housing costs.
The money runs down quickly. And once it’s gone, reapplying for benefits takes time.
This applies to life insurance payouts too. If a life insurance policy pays out directly to your child (rather than into a trust), the payout counts as capital for means testing.
The trust route
A trust holds money for your child’s benefit without giving them direct ownership. Because your child has no absolute legal entitlement to the capital, it sits outside the means test.
You set up a trust by including specific clauses in your will. A trustee (someone you choose) manages the money and makes distributions for your child’s benefit. Your child receives the support without losing their benefits, provided the trustee pays for things directly rather than handing over cash: money paid straight into your child’s hands counts as their own capital or income for benefits purposes.
| Direct inheritance | Inheritance via trust +Protected | |
|---|---|---|
| Capital ownership | Child owns the money | Trustee holds it on child’s behalf |
| UC impact | Stops at £16,000 | Not counted as child’s capital |
| Social care charges | Begin at £14,250, full cost above £23,250 | Not counted for charging |
| Flexibility | Child controls spending | Trustee manages distributions |
| Benefits protection | None | Full protection |
Types of trust for disabled children
Two main trust types work for SEND families. The right one depends on whether you want the money directed solely to your disabled child or shared across family members.
Disabled person’s trust (DPT): The preferred option for most SEND families. Income and capital must be applied for the benefit of the disabled person, though up to £3,000 a year (or 3% of the trust’s value, if lower) can go to someone else without affecting its status. Exempt from inheritance tax 10-year periodic charges. Your child can benefit from income taxed at their personal rate (potentially 0%) through a Vulnerable Person Election.
Discretionary trust: Gives trustees flexibility to distribute to a class of beneficiaries (for example, all your children). Subject to 10-year IHT charges, but capital is still outside the means test.
A disabled person’s trust carries no IHT periodic charges and has an annual CGT exempt amount of £3,000. These tax advantages exist because the law recognises the purpose of protecting a disabled beneficiary’s benefits.
A disabled person’s trust is almost always the better choice for a sole disabled beneficiary, thanks to those tax advantages. A discretionary trust still makes sense if you want to include other beneficiaries, like siblings, in the same trust.
Why this is urgent for SEND families
Research by Contact (Counting the Costs 2024, surveying 4,262 families) found that 62% of SEND families have reduced or left work, with an average annual income loss of £21,174. UK academic research on the cost of child disability estimates families spend an extra £35 to £79 a week more than families without a disabled child, depending on severity and type of need.
In this financial context, estate planning matters as much as any other part of your finances. The money you leave could be the difference between your child having a good life or losing the support they depend on.
Not sure which trust type fits your situation? The free assistant at SEND Parents Help can explain how a disabled person’s trust works and what questions to ask a specialist solicitor.
What about life insurance?
Life insurance is often the simplest way to leave a financial safety net. But the policy must be written in trust, not paid directly to your child.
Writing a policy in trust means the payout goes to a trustee, not to your child’s estate. The trustee then manages the money according to the trust terms. Most insurers offer a trust option at no extra cost when you take out the policy.
If you already have a life insurance policy that isn’t in trust, contact your insurer. Many allow you to add trust provisions without cancelling the policy.
When to get legal advice
A will with trust clauses requires a solicitor who understands both trust law and disability benefits. A standard will from a high-street solicitor may not include the right provisions.
Key moments to seek legal advice:
- Before your child turns 18 - coordinate trust planning with Court of Protection deputyship if your child lacks capacity
- When you first take out life insurance - ensure the policy is written in trust
- After any major life change - new diagnosis, change in benefits, change in family circumstances
- Every 3-5 years - review trust arrangements as tax law and benefit rules change
These timings help you get ahead of changes that could affect your child’s situation.
Do not attempt to write trust clauses yourself. The interaction between trust law, tax law, and benefit regulations is technical. A poorly drafted trust can fail to protect benefits or create unexpected tax liabilities. Specialist advice typically costs £500-£1,500 for a will with trust provisions (more for complex arrangements).
Finding a specialist solicitor
Look for solicitors who are members of:
- STEP (Society of Trust and Estate Practitioners) - specialists in trusts and estate planning
- The Law Society’s Wills and Inheritance Quality Scheme
- Disability-specific services like Mencap’s Wills and Trusts Service
Getting help
Mencap Wills and Trusts Service runs free webinars and guides on wills and trusts for families of people with a learning disability, and can send you a list of STEP-qualified solicitors. Mencap does not write wills or set up trusts itself.
Contact (0808 808 3555) advises on financial planning for families with disabled children.
Scope (0808 800 3333) provides guidance on benefit protection and estate planning.
The Law Society Find a Solicitor directory lets you search for specialists in trusts and disability.
Don’t leave it to chance
If you haven’t made a will, your child could inherit directly under intestacy rules. If you have a will but no trust clause, the same risk applies.
A properly drafted trust is a one-off legal cost. It protects tens of thousands in lifetime benefits. And it gives you peace of mind that your child will be supported after you’re gone.