A Trust for a Child with Disabilities

A special needs trust in Mauritius is a family trust built around one question: what happens to a child with disabilities when the parents are no longer there to manage money, make decisions and notice when something goes wrong? Unlike a trust for a young child, which is designed to end when the child grows up, this structure is meant to last as long as the beneficiary needs it.

This page explains how such a trust is organised under the Trusts Act 2001, how it can be drafted so that it supplements rather than replaces existing support, and what to settle with an adviser before signing. It is general information, not advice: the right design depends on the child's condition, the family's residence and the benefits actually in play.

Why an outright inheritance often fails a vulnerable child

Leaving assets directly to a child with disabilities looks simple, but it can create three separate problems.

• Capacity. An adult who cannot manage money independently may be unable to give a valid receipt, invest sensibly or resist pressure from others.
• Support. Public or private support that depends on a person's own resources may be reduced or withdrawn once a lump sum arrives. Whether that happens depends entirely on the rules of the scheme concerned, which this site does not describe; check them before deciding.
• Succession. An outright gift passes into the child's own estate. On the child's death it follows the ordinary rules of succession rather than the family's wishes, and forced heirship rules may apply (see forced heirship and trusts).

A trust separates the three. Legal ownership sits with the trustee, the child enjoys the benefit, and the deed says where the assets go afterwards.

The key design choice: discretion

The feature that makes a trust suitable for a vulnerable beneficiary is usually discretion. In a discretionary trust, the child has no fixed entitlement to income or capital. The trustee decides whether, when and how much to apply for the child's benefit.

That matters for two reasons. First, there is no fixed sum the child can be said to own, which is relevant where support is assessed against personal resources. Second, the trustee can respond to changing needs: therapy, adapted housing, a carer, education, transport, or simply a holiday.

Discretion is not a guarantee about how any scheme will treat the trust. It is a drafting tool, and its effect should be tested against the specific rules that apply to your family.

How the structure fits together

Each role has a distinct job.

The settlor

The settlor creates the trust and transfers the assets. Under section 8 of the Trusts Act 2001, a settlor may also be a trustee, a beneficiary, a protector or an enforcer, but cannot be the sole beneficiary of the trust they created. In practice, parents often choose to keep a supervisory role while they are able, and to let it pass to others over time. See the settlor's role and limits and how much control a settlor can keep.

The trustee

The trustee holds the assets and takes the decisions. For a trust meant to run for decades, continuity is the main criterion: an individual trustee may die or lose capacity, whereas a corporate trustee does not. A trust administered in Mauritius needs a trustee holding the appropriate FSC authorisation; the Financial Services Act 2007 requires a Management Licence to act as a corporate trustee or qualified trustee. The trustee's obligations are set out in duties of a trustee toward the family.

The trustee must also keep proper accounts and records. Section 38(3) of the Trusts Act 2001 requires up-to-date accounts and documents, and an alphabetical register of the names and last known addresses of each beneficiary and settlor.

The protector

A trust protector is a person or company appointed to advise the trustee. Under section 24 of the Trusts Act 2001, and unless the deed provides otherwise, the protector may remove and appoint trustees, change the governing law, move the place of administration and withhold consent to certain acts, without becoming a trustee.

For a vulnerable beneficiary this is a practical safeguard. If the family loses confidence in the trustee years from now, someone independent of the trustee can act. Many families name a trusted relative or professional as protector and provide for a successor. Whether you need one at all is discussed in do you need a trust protector?.

The letter of wishes

A letter of wishes is a non-binding note in which the parents explain the child's routines, preferences, medical context and what a good life looks like. It guides the trustee's discretion and is easy to update as circumstances change, which the deed itself is not.

Drafting points that matter most

The trust deed (see what a trust deed contains) is where the protection is won or lost. Points to raise with the adviser:

• Beneficiary class. Name the child, but think about who else may benefit, for example siblings or a carer's family, so the trustee can fund the whole arrangement around the child.
• Purpose of applications. Describe the intended uses broadly (care, housing, health, education, quality of life) and state that the trust is to supplement, not replace, other support.
• Protective clauses. Section 18 of the Trusts Act 2001 recognises protective or spendthrift trusts: a beneficiary's interest may be made subject to termination, restriction on alienation or suspension on the beneficiary's insolvency or seizure of their property. This helps shield the interest from creditors and from pressure. See protective trusts and spendthrift trusts.
• Payments to third parties. Allow the trustee to pay providers directly rather than hand cash to the beneficiary.
• Duration. Check that the period the trust may run matches a lifetime; see how long a Mauritius trust can last.
• Ultimate destination. State who receives the remaining assets when the child dies.
• Successor trustees and protector. Provide a mechanism that does not depend on a single person.

What the trust does and does not change

Planning around benefits and care

A special needs trust is often described as a way to keep entitlements. That is only a goal, not a result the law promises. A cautious approach has four steps.

1. Identify the support in play. List what the child receives now, from which public or private source, and under whose rules.
2. Ask how each source treats a trust. The answer can differ between a local scheme, an overseas benefit and a private insurer. Residence matters; for family-specific angles, see the pages for UK, French and South African resident families.
3. Draft to match. Discretion, third-party payments and a supplementary purpose are the usual tools.
4. Review as circumstances change. Rules, the child's needs and the family's residence all move.

Tax and transparency

Tax depends on the facts, so the full picture belongs in how trusts are taxed in Mauritius. Two points are worth knowing here. Under section 46(4) of the Income Tax Act, a distribution to a trust beneficiary is deemed to be a dividend for the beneficiary. And section 46(2) continues to refer to certain trusts with non-resident settlors and beneficiaries, but such a trust remains taxed at the Part IV rate of 15%. Whether any particular distribution is taxed for a child living abroad is a separate question; see tax for non-resident beneficiaries.

On transparency, a trust administered by a qualified trustee is recorded in a register kept by the Financial Services Commission under section 26A of the Financial Services Act 2007. The register includes details of the beneficiaries, trustees, settlors, protectors and enforcers. For anti-money-laundering purposes the beneficial owners of a trust under FIAMLA 2002 include the settlor, the trustee, any protector, each beneficiary (or the class of beneficiaries) and anyone exercising ultimate effective control. Families should expect to give this information and keep it current. This is separate from the question of privacy, covered in are Mauritius trusts confidential?.

Alternatives to consider

• A will with a testamentary trust. The trust only comes into being on death, so it gives no protection during the parents' lifetime. See testamentary trust.
• A foundation. It has its own legal personality and can benefit a person or class of persons under the Foundations Act 2012. See trust vs foundation.
• A purpose trust. Under section 19 of the Trusts Act 2001 this form is valid without beneficiaries, and requires an enforcer. It is a poor fit for a named child, who is better served by an ordinary beneficiary trust.

Checklist before you meet an adviser

• Record the child's diagnosis, current needs and likely future needs
• List all support the child receives and its source
• Decide who should be trustee and who should be successor
• Decide whether a protector is wanted and who it should be
• Draft a letter of wishes describing daily life and priorities
• Decide who receives the assets when the child dies
• Review wills and matrimonial regime so they do not cut across the trust
• Check how the trust is treated by each scheme and in each country of residence
• Plan an annual review (see the annual family trust review checklist)

When parents die

The trust is useful because it continues. Because the assets are already in the trustee's hands, the parents' death does not leave the child waiting for an estate to be settled. See what happens when the settlor dies for what changes and what stays the same.

To discuss a specific situation with an FSC-licensed corporate service provider (Management Licence), use the form on the contact page.