When the Bhatias realised that their two-year-old daughter Isha is autistic, their world changed forever. Isha, now 19 years old, is completely dependent on her parents, even for her basic needs. The Bhatias’ universe has shrunk and everything that they do now is influenced by their daughter’s needs and well-being. They have been saving aggressively to support their daughter and have also bought insurance covers. But is that enough to protect their daughter’s future and to ensure her well-being?
Countless parents find themselves in a similar situation. A special child in the home changes things in so many ways for the family that most parents with normal children will never be able to fathom or comprehend their situation.
Provide for the future: It would be stating the obvious to say that for any child, the love, affection and care of parents is irreplaceable. In case of special children, however, the parents must also ensure that their children remain safe and are cared for adequately after both the parents have expired. Even after such a child turns into an adult, she may continue to need support even in the later stages of her life.
An estate plan is important for every individual. But in the case of parents of special children, it is critical. While generally, a simple Will is enough in case of small family structures, it will not suffice in cases where there are physically or mentally challenged members in the family. The primary reason is that a Will can only facilitate the seamless transfer of an individual’s wealth to his heirs or beneficiaries, in this case, the differently-abled daughter. But will such people with disabilities be able to handle all the wealth and assets and the associated complexities? Also, putting the wealth in the hands of such differently-abled people could itself become a risk. For instance, if it is known that a particular disabled person is the owner of substantial wealth, there are chances that some unscrupulous person may defraud or even hurt such a person.
An immensely flexible structure: In most such cases, setting up a private family trust is the ideal solution. This is a legal structure created under the Indian Trust Act, 1882. It is different from a charitable trust. It offers as much flexibility or discretion as the settlor — the person creating the trust — wants.
A private family trust is an extremely powerful as well as legal structure that has been used by smart people around the world for centuries to manage their estate to their satisfaction.
A private family trust offers several distinct advantages over a simple Will. A trust can be set up and made operational even during the lifetime of the settlors. The settlors can, at the time of creating the trust, decide its tenure; fix the roles and responsibilities of the trustees; define the benefits that the beneficiaries of the trust can draw from the trust regularly; set up the investment management principles to ensure safety and growth of assets; and also define how the assets would be distributed amongst the beneficiaries, and in what conditions.
In case of parents with special children, through the trust structure, parents can achieve multiple objectives, one of which could be ensuring the health, happiness, safety and well-being of their special children. Let us examine how a private family trust can be a useful structure for situations where the family has a special child.
Appoint trustees: The first big advantage of a trust is that instead of the disabled person managing all the assets himself, the trustees appointed in the private family trust shall take up that responsibility. Power can be given to certain trustworthy individuals to appoint and remove trustees. To ensure that the latter manage the money prudently, the trust document can specify the do’s and don’ts, and mention in as much detail as possible, the investment management principles.
Through the trust, the parents can plan exactly how much money should be given to their special child for her living expenses and what kind of nursing care should be provided?
They can also take care of ancillary needs like maintenance of the house and attendant staff; allow for some flexibility for withdrawals for specific emergency purposes, and finally, create a process for the trust to wind up after a certain period of time.
Considering that the trust has legal backing, any chances of misappropriation, fraud, coercion, mismanagement, exceptional loss, etc. become extremely rare and can be completely avoided by having a strong well-drafted trust structure in place.
Overseeing the trustees: One of the questions that come to people’s mind often is how do they trust the trustees. What if the trustees do not do their job properly or misappropriate funds from the trust? It is a valid question and that is why experts are needed to create the right structure where the trustees can be supervised, or if needed, can be removed and replaced.
There are many ways to secure the trust, its assets, and the rights of the beneficiaries. A qualified and experienced lawyer or firm can provide the right guidance based on specific situations.
One can regard the private family trust as one’s alter ego. The way in which you act in your day-to-day life when dealing with your children, investing your money, spending your money and other features can be exactly replicated in the trust structure.
The settlors of the trust have all the flexibility to design a structure that is a perfect fit for their family situation.
If someone has a special child at home, they should definitely consider creating a comprehensive estate plan and should do it sooner rather than later.
The writer is managing director of Ladderup Wealth Management