Child with disability - want to plan for their future

Your age: 42
Your spouse's age: 42

Number and age of children: 2 - 6&1

Income and expenditure
Annual gross income from employment or profession: €120k
Annual gross income of spouse/partner: Nil - Home Carer

Monthly take-home pay: €4600 after 25% AVCs

Type of employment - e.g. Employee or self-employed. - Employed
Employer type: e.g. public servant, private company. - Private Company

Summary of Assets and Liabilities
Family home value: €950,000
Mortgage on family home: €120,000
Net equity: €830,000

Cash: €70,000
Defined Contribution pension fund: €400,000
Company shares : €700,000 - spread of 70 public equities. Large Caps mostly in diversified sectors. Dividend income c. €20k per annum. Self managed
Buy to Let Property value: €600,000 from 2 apartments - income of c. €20k net per annum
Buy to let Mortgage: nil

Total net assets: c. €2.5m

Family home mortgage information
Lender - BOI
Interest rate - 2.25%
Type of interest rate: tracker, variable, fixed. - Fixed
Remaining term: 20 yrs
Monthly repayment: €700

Other borrowings – car loans/personal loans etc
None

What specific question do you have or what issues are of concern to you?

Fully aware that the above isn't the typical money makeover situation and that the above situation is healthy
Our eldest child is unfortunately quite severely disabled and is unlikely to ever lead an independent life
My financial goals are therefore fully around providing for them when we are no longer around rather than any early retirement etc
My wife has left the workforce to be a home carer and I'm reasonably well tuned in and claim the various additional tax breaks/credits for the above type of scenario

My question which one of the financial planners might know out there is, is there something more I should be doing now?

I see I can gift €3k per annum to a child tax free independent of the CAT threshold, should I be doing that to my eldest?
Would any brokerage open up a share account for a 6 year old, or could I do some form of trust arrangement?
Or is there any other advantageous steps I should be taking to help accrue gains in a more efficient manner in this type of situation

Appreciate any help people might be able to give

Larder13 said:

I see I can gift €3k per annum to a child tax free independent of the CAT threshold, should I be doing that to my eldest?

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Yes. and so can your spouse. Start ASAP as there's about €36,000 missing from a possible trust right now.

You don't mention carer's allowance specifically, so can I assume it's taken care of?

I don't want to turn this post into a heart-rending examination of your child's medical conditions, but if mobility is an issue, get the car that's used for transport suitably adapted and badged to qualify for the zoned parking spaces, free motor tax, VAT refunds on fuel and so on, grants for necessary adaptions, VAT refunds on those (VAT-registered, approved engineering firms only).

My heart goes out to you, I have been down this road a long time ago and what would have been my son's 34th birthday is later this month. He died aged only 8.

I'll keep an eye on the thread. Some people PM/DM other posters with similar problems and potential solutions. I work on the basis that if information is out in the open it will reach a wider audience. That's the AAM ethos, unless the mods want to take a swipe at me as a heretical poster.

Be mindful that in the future, if your child applies for a social welfare payment when they reach 16 (e.g. disability allowance), savings over 50k (current rate) could be assessed as means.

Income available currently

1. 3k gifts annually from you your wife and others.
2. Domicillary Care allowance 340 euro per month until 16. Disability allowance will follow.
3. Respite care Allowance paid in June 2k from 2025.
4. Deed of Covenant for incapacitated minor available.
5.Tax credit 3500 for incapacitated child.

Just to add seek good advise as any assets your child may own may be taken into consideration in the future around state benefits etc.

So, I am not an expert on this, and there are a lot of good people here who can help.

Have you claimed an incapacitated child tax credit, currently 3300 a year if not, make sure to get back the last few years up to 4 years currently 2020 , from the 1st of jan it will be 20021 so act quickly, so this is a big lump sum of money. need ICC2 form signed from the GP and apply on my revenue for each of the years.

A deed of covenant is a very tax-efficient way to transfer income from you to your child. It is legal and binding, and there is plenty of info on this site about it. You basically get a tax credit of 20% for it, and then your son can use their tax band credit to get a tax top-up of 20% on his side. So its very efficient . You should talk to the accountant about it, and the deed of covenant template can be witnessed by then and signed by them.

But at 16, your child will be checked for Disability allowance, which means tested, so double check that the above transfers of money are within these limits or set up in trust format. But need to speak to a financial advisor about the option. You need to pay them per hour for truly indepent advise . If they free or work for broker then they could be tied agents so cant advise you of all options and only what they can sell.

As Mathepac say the mobility grant . Is kicked of by getting a "primary medical cert " which done by chief medical officer but exempts for passengers' cars for VRT and VAT on new or 2nd hand cars ( their is limits) , no road tax, 67 cent back per litter of fuel used for the passenger, no tolls and blue bages, Car has to held for min 2 years . Car needs to be adapted in some ways for your child. VAT off/ VAT free for additional applications or devices needed for the child.

I think a key question is whether you anticipate that your eldest will be capable of making sensible financial decisions for himself when he reaches the age of majority?

If not, then I don’t think it makes sense to gift money to a bare trust arrangement or similar.

In that scenario, I think yourself and your wife should be focusing on creating a protective discretionary trust, either inter vivos or in your respective wills (or both).

A protective discretionary trust has the effect of deferring any CAT liability until distributions are actually made to a beneficiary and can therefore be very efficient from a tax perspective.

A decent solicitor can talk you through the details.

A Discretionary Trust that is exclusively for the benefit of a person who is permanently incapacitated (physically or mentally) is exempt from tax levies and does not impact on the person's Disability Allowance means test. You might consider if this would be an appropriate way to accumulate funds for your child's longer term needs.

It’s very early days for the 1yo sibling, but is there an opportunity to tax-efficiently feed €6k per annum to the next generation via your younger child also, perhaps with a view to expressing your wishes as to how that would eventually be deployed - would not be legally binding of course, but perhaps a potentially useful avenue that might avoid impacting future social welfare?

- currently, disability allowance is payable from 16 years of age (ive heard this age may increase at some stage). It is a means tested payment so consider how any savings in child's name may impact this.
- discretionary trust can be setup for child. I have looked onto this and need to get my own will updated so that this will be setup upon my death. I believe it can be more complicated to setup in advance and I'm not sure if there's any benefit in doing it in advance
- AIB have a "Person in Care" bank account however person may need to be 16. GP has to sign off on forms to allow carer access. My son lives at home and I work full time, and set this up to give him additional support. This is preferred approach than opening up joint account. I believe you can make 2 carers.
- you are most likely over the limit for grants to modify the home, however you may be able to get tax back if this is a consideration.
- I highly doubt it's possible to open brokerage account at such a young age. There may also be co siderations around capacity later. Might be as well for you to just invest part of your own income and use for care needs, then leave in your will to go into trust. Again for DA there is a limit, also need to consider limit around medical card.

On a separate note, I think it’s critical that the OP has appropriate life assurance and income protection policies in place.

I would also be inclined to sell some shares and pay off the PPR mortgage.

Sarenco said:

I think a key question is whether you anticipate that your eldest will be capable of making sensible financial decisions for himself when he reaches the age of majority?

If not, then I don’t think it makes sense to gift money to a bare trust arrangement or similar.

In that scenario, I think yourself and your wife should be focusing on creating a protective discretionary trust, either inter vivos or in your respective wills (or both).

A protective discretionary trust has the effect of deferring any CAT liability until distributions are actually made to a beneficiary and can therefore be very efficient from a tax perspective.

A decent solicitor can talk you through the details.

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This is the key issue here. When you are worth €2.6m and probably a lot more within 10 years, putting €60k into a trust to avoid €20k CAT is neither here nor there.

You need to sit down with a specialist solicitor who will put things in place in case either or both of you die suddenly. And this can be updated as things develop.

Brendan

Larder13 said:

Buy to Let Property value: €600,000 from 2 apartments - income of c. €20k net per annum

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This doesn't sound right. Is the €20k net actually €40k gross because it is in your name and taxed at ~50%?

If so, there should be a better way to structure the ownership of your assets so that the rent and dividend income use up your spouses tax credits and bands more efficiently

Larder13 said:

I see I can gift €3k per annum to a child tax free independent of the CAT threshold, should I be doing that to my eldest?
Would any brokerage open up a share account for a 6 year old, or could I do some form of trust arrangement?

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It's very possible to do this and as others point out, it would be €6k as it would be from you and your spouse.

However, I don't think it is the right thing to do as it puts money out of reach that you may need to use. If you gift €6k for the next 15 years, you are 'only' saving €30k of a CAT bill. It's small in the overall scheme of things relative to your wealth.

Just my opinion but nobody (revenue included) will bat an eyelid at you supporting or spending money on your disabled (adult) child so I don't think inheritance planning should dictate your next steps.

It is probably more important that your wills are up to date and reviewed regularly. Having guardians chosen in case anything happens to you would also be very important, ensuring that you have asked them and agreed in advance

Brendan Burgess said:

You need to sit down with a specialist solicitor who will put things in place in case either or both of you die suddenly.

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Actually Brendan, you’re right - it does need a specialist trusts & estates solicitor.

Somebody like Nora Lillis of Gartlan Furey.

Thanks so much for the various replies. It was exactly what I was hoping to get and the suggestions are great - both big picture and small savings (which add up) though I think we've made all the logical ones around tax credits and care allowance which we already receive etc

@mathepac, thanks for your kind note and RIP to your son, and I know there's a solidarity with parents who've travelled this road. We're hopeful that our sons condition won't be life limiting but he will always be fully dependent on others for most needs including finances.

I think my main takeaway is getting some good legal advice. We have a will but it is a bare bones, "all to wife then to kids" type arrangement. We do need to think more about guardians etc. We of course have a hope it will be us for 40 years and then his sibling but who knows what might happen (We're lucky that we do have options in the wider family who would help).

Bringing that together with some trust advice seems sensible and thanks Sarenco and Brendan for the suggestions on solicitor names. I'm going to pick it up with one or other of them and a discretionary trust (from a quick review) does look like the path.

Deed of covenants and mobility grants also new to me so definitely will be looking in to the benefits of those also

@Sarenco on selling shares and repaying mortgage, I have gradually been doing lump sums down to the current balance and will do more. Just with money at 2% it was hard to justify fully doing it. Will be rebasing to a variable rate soon so will probably materially reduce or clear it at that point.

Thanks again to all for that input. Hugely appreciated