Parents of children on the autism spectrum are always worried as to what will happen to their child after they are no more or if something happens to them suddenly. They want to ensure that their autistic child is taken care of and is able to lead a financially independent and dignified life after they are gone.
Forming a Private Trust is an effective estate planning tool in such cases. It ensures that the assets are properly looked after by the Trustees for the benefit of the Beneficiary. It helps in creating a secure future for a special needs child and ensures that the legacy left for the child by his parents is managed effectively to provide for the child’s lifetime care needs.
As per the Indian Trust Act, there is no restriction as to who can set up a Family Private Trust. It can be set up by Parents, Grandparents or Legal guardians of the child. When a Private Trust is formed, the special needs child is the ‘Beneficiary’ of this trust. The Person who sets up the Trust (usually Parent) is the ‘Settlor’ and identifies ‘Trustees’ who will manage the assets of this Trust for the benefit of child.
While setting up a Trust, it is very important to estimate the lifetime care cost of your special needs child as it will help to understand how much funds or assets should be transferred to the Trust. These funds should be enough to manage the child’s affairs and bear the cost of trust if any.
ELEMENTS OF A PRIVATE TRUST
A Person who creates Trust from his Property
Persons responsible for the Trust Property
Person benefiting from the Trust Property
Property (movable & immovable) that is used for the benefit of the Beneficiary
Legal Document that lays down rules & regulations for the management of Trust
Identifying the lifetime care cost is a complete financial planning exercise for which various factors need to be considered such as life expectancy, inflation, returns, cost for managing the Trust such as accounts management, managing investments, professional fees. etc. Hence, Trust should have enough funds to meet the care expenses of the child as well as expenses of the Trust.
The next step is preparing the Trust Deed. A trust deed is a legal document which validates the setting up of a private trust, lays down provisions regarding the rules and powers of the trustees, management of funds, dos and don’ts, income distribution to the beneficiary, the winding up of trust, etc. all written in the trust deed. Once the deed is drafted, it is mandatory to get it registered.
NRI families with special needs children usually wish to settle in India. They can form the trust for their children in India subject to provisions of the Income Tax Act, 1961 and The Indian Trust Act, 1882.