Providing for your children in your will

Wills and probate specialist Rose Phelps explores the practical considerations regarding children when drawing up a will.

While no one likes to think of dying before their children are grown up, providing for them in your will is advisable and provides reassurance and certainty.

Without a properly drawn up will, it can be problematic and expensive to ensure adequate provision, particularly where children are still minors. Problems can arise where:

• there is no will, as the rules of intestacy can lead to unexpected and often undesirable outcomes;
• careless wording results in the unintended exclusion or inclusion of step-children or children from a former relationship; or
• some legal provisions may conflict with, or even supersede, what the will says.

Provision for guardianship and financial support for the children is often phrased to take effect only after your partner has also died. You should consider making provision in any event, particularly if there are children from a previous relationship.

Wills and probate specialist Rose Phelps outlines the key practical considerations regarding children when drawing up a will.

Appointing guardians

A guardian will care for and bring up a child who has no parents alive. They decide about education, healthcare, religious practice, where the child lives and generally take the parent’s role in bringing up the child. As children approach 18, in certain areas of their life they become more autonomous, for instance in healthcare.

Usually, where parents have divorced, separated or never had a legally recognised relationship, the surviving parent will still have parental rights. These rights take priority over the appointment of a guardian, although not all parents realise this particularly if they were unmarried and the other parent has been out of contact.

The courts can make guardianship orders, but this can be slow, costly and distressing for the family, particularly for children old enough to express their own wishes. This can be avoided if the will is clear about who is to be a guardian and is realistic about the rights of the surviving parent.

Appointing executors and trustees

Executors and trustees will handle the initial administration of assets and liabilities, pay any inheritance tax and obtain the grant of probate of the will. They subsequently pay out any legacies and distribute the estate. If the will sets out continuing trusts, they will hold the net assets as a trust fund on the terms of the will.

At least two trustees should be appointed, sometimes three or more, and naturally it helps if they can work well together. If one trustee will be required to monitor another in anticipation of difficulties, it begs the question whether that person is suitable.

Family members or close friends can make very good trustees. They can obtain technical and tax advice from solicitors and accountants and should also take independent financial and investment advice. Consequently, they do not need to be professionals themselves, but it helps to appoint executors and trustees who are mature, financially aware, reasonably efficient with correspondence and paperwork, and who know and relate to the children and the guardian appointed.

Many solicitors and accountants act as professional executors and trustees, as do trust corporations which are companies who are legally permitted to act as trustees. They are often appointed when there is no one else suitable, when the estate and trust are particularly complex, or when independent outside trustees are wanted. However, without any previous relationship, they have to work harder to build a rapport with the children and guardians.

Some parents appoint the same people to be guardians as well as trustees, which can work well if they are suited to both roles. In that situation it does help for the person making the will, and for the chosen individuals, to think of the two roles as distinct and to do so at least for as long as the children are under 18.

Ordinarily, the guardians ask the trustees for the money to support the children, and the trustees decide to release funds, the amount and in what way. Guardians cannot demand provision.

There are advantages where the trustees are separate, as they may sound a cautionary note or even put a break on spending by the guardians.

If guardians are also trustees, they may be vulnerable to allegations from the children later. For example, one could say that trust money benefitted the guardians by paying for an extension to their house, thereby adding value as well as housing the children. It is hard to demonstrate proper process when decisions are not exposed to rigorous discussion with others.

Financial provision

When it comes to planning financial support, there are many variations on a theme. All involve decisions about entitlement to income (at 18 or older) and entitlement to some or all of the capital (at 18, older, never, or at the discretion of the trustees). These decisions have significant tax implications for the trust itself, for the children and their own estates going forward. Even when the wording of the will is clear, some statutory provisions can override it, particularly sections 31 and 32 of the Trustee Act 1925 dealing with entitlement to income, and the power of the trustees to advance capital.

Providing for children who are unlikely to be able to deal with their own finances, through illness or lack of capacity, needs even more detailed advice. Future means-tested care funding will be an important consideration. Where the estate is not large enough to support the children after a parent dies, taking out life insurance cover and “writing it in trust” can be an affordable option, but requires specialist financial and legal advice.

Both guardians and trustees appreciate knowing the parents’ views about their children’s future welfare and upbringing, and about how the trust fund might be used for them. Setting this out is best achieved via a letter of wishes in case any conversation is forgotten or not recalled accurately. A letter of wishes is a private document usually stored with the will, but not part of it. Your solicitor can help you to prepare this.

Generally, it is not desirable to restrict the discretion of the guardians or the trustees, as they may need to adapt to changing circumstances. A letter of wishes is not binding and so allows this.

If the parent has any doubts about a guardian or trustee respecting their wishes and beliefs, perhaps they are not the right people to pick.

Providing for the care of and financial provision for your children has a number of legal and tax implications, which you will need to consider. Seeking expert advice will help you to avoid the many pitfalls and can reduce the confusion and expense in dealing with the aftermath of a painful family bereavement.