How to arrange finances for daughter should we die?
Discussion
Hi folks,
I appreciate this is potentially a complex subject, but I'm hoping to understand some of the basics.
My wife and I are reasonably well insured and own our home outright. However, we now have a young child (1 year old) so would like to make sure she's ok should something happen to the both of us.
We have a family member (sister) who we plan to ask to take care of our little girl should the worst happen, however, she's truly crap with money. Ideally, we'd like some way of releasing some funds to my sister, perhaps with further funds at set intervals, with any remainder paid to our daughter on reaching, say, 21.
This, I assume would involve making sure the house is sold with the equity going into some sort of trust fund? How might we go about sorting the rest of our wishes? Is this something for a financial adviser or solicitor?
Thanks for any help
I appreciate this is potentially a complex subject, but I'm hoping to understand some of the basics.
My wife and I are reasonably well insured and own our home outright. However, we now have a young child (1 year old) so would like to make sure she's ok should something happen to the both of us.
We have a family member (sister) who we plan to ask to take care of our little girl should the worst happen, however, she's truly crap with money. Ideally, we'd like some way of releasing some funds to my sister, perhaps with further funds at set intervals, with any remainder paid to our daughter on reaching, say, 21.
This, I assume would involve making sure the house is sold with the equity going into some sort of trust fund? How might we go about sorting the rest of our wishes? Is this something for a financial adviser or solicitor?
Thanks for any help
HI Leigh,
It sounds to me like a family income benefit policy would suit. You could insure you and your wife against death and/or critical illness to provide your daughter an income until dependant age i.e. 21.
example - £40000 per annum x 20 years = ensures your daughter will receive the benefit of the money until she would hopefully no longer need it.
It's also really essential that a policy like this is written in trust.
If you want any advice or quotes, then drop me a line as we arrange this type of cover for many PHr's
Dale
It sounds to me like a family income benefit policy would suit. You could insure you and your wife against death and/or critical illness to provide your daughter an income until dependant age i.e. 21.
example - £40000 per annum x 20 years = ensures your daughter will receive the benefit of the money until she would hopefully no longer need it.
It's also really essential that a policy like this is written in trust.
If you want any advice or quotes, then drop me a line as we arrange this type of cover for many PHr's
Dale
Yes, this is primarily a will / solicitor / trusts thing. I did a similar thing with my children; in the event of the death of both parents the estate goes into trust and pays out over time. The managers of the trust do not have to include the guardian of the child, so that's one way to deal with your 'bad with money' concern. Mine would pay a monthly amount, plus I also set some lump sum events such as 16th/18th/21st birthdays, and any termly fees for education.
It's a complex area and you need a lawyer familiar with trusts. Also because trust law changes regularly as HMRC tries to close loopholes you can't do the paperwork now and just leave it for twenty years, you have to check it every few years and make sure your setup is still valid.
It's a complex area and you need a lawyer familiar with trusts. Also because trust law changes regularly as HMRC tries to close loopholes you can't do the paperwork now and just leave it for twenty years, you have to check it every few years and make sure your setup is still valid.
Newc said:
Yes, this is primarily a will / solicitor / trusts thing. I did a similar thing with my children; in the event of the death of both parents the estate goes into trust and pays out over time. The managers of the trust do not have to include the guardian of the child, so that's one way to deal with your 'bad with money' concern. Mine would pay a monthly amount, plus I also set some lump sum events such as 16th/18th/21st birthdays, and any termly fees for education.
It's a complex area and you need a lawyer familiar with trusts. Also because trust law changes regularly as HMRC tries to close loopholes you can't do the paperwork now and just leave it for twenty years, you have to check it every few years and make sure your setup is still valid.
This is pretty much spot on, good advice, I'd follow it....It's a complex area and you need a lawyer familiar with trusts. Also because trust law changes regularly as HMRC tries to close loopholes you can't do the paperwork now and just leave it for twenty years, you have to check it every few years and make sure your setup is still valid.
Does it need to be that complicated ?
Our wills state that in the event of our deaths, our children would be looked after (ie adopted) by wife's Sister, (who would get no financial assistance other than Child benefit). If sister in law were terrible with money this would mean that they would live a life of poverty. It was my sister in law who stated that they really wouldn't want "paying" and they would cope.
Our estate would be put in trust until the youngest was 21 and looked after by wife's Brother and my sister
Mind you all are trustworthy and would do what had to be done out of a sense of duty. Plus all wills related to nephews and nieces are similar.
Our wills state that in the event of our deaths, our children would be looked after (ie adopted) by wife's Sister, (who would get no financial assistance other than Child benefit). If sister in law were terrible with money this would mean that they would live a life of poverty. It was my sister in law who stated that they really wouldn't want "paying" and they would cope.
Our estate would be put in trust until the youngest was 21 and looked after by wife's Brother and my sister
Mind you all are trustworthy and would do what had to be done out of a sense of duty. Plus all wills related to nephews and nieces are similar.
The main complication is the investment of the money, someone needs to be responsible for that, and for many it is the release of funds on an ongoing basis to look after the children. Whilst it is nice if a sibling looks after and pays for the upbringing of the children for many the estate should release income to pay for it.
None of that makes it particularly complex from a legal perspective, the biggest issue is choosing the trustees and the rules within which you want to whole thing to operate. But a solicitor experienced in this area will be fine taking people through it.
None of that makes it particularly complex from a legal perspective, the biggest issue is choosing the trustees and the rules within which you want to whole thing to operate. But a solicitor experienced in this area will be fine taking people through it.
What you need is a trust with two trustee's who aren't also guardian to your kids.
Ours is set up that way with distributions at the age of 21 and finally 30.
Not only do you need to be able to provide for your child but there might be a situation where the guardian's home isn't big enough. If that's the case the trustee's could agree to fund the part purchase of a larger house (and perhaps the costs as the guardian might not have to move otherwise) with the trust retaining a % interest in that property. Lots of permutations!
Finding the right guardian and the right trustee's isn't easy. In my case the latter was easier than the former! My sister would be good but lives in New York which is not ideal and my wife has two sister's neither of which would we want to subject our kids to living with!
As long as you have sufficient life insurance or assets there is no need for any kind of "product"
Ours is set up that way with distributions at the age of 21 and finally 30.
Not only do you need to be able to provide for your child but there might be a situation where the guardian's home isn't big enough. If that's the case the trustee's could agree to fund the part purchase of a larger house (and perhaps the costs as the guardian might not have to move otherwise) with the trust retaining a % interest in that property. Lots of permutations!
Finding the right guardian and the right trustee's isn't easy. In my case the latter was easier than the former! My sister would be good but lives in New York which is not ideal and my wife has two sister's neither of which would we want to subject our kids to living with!
As long as you have sufficient life insurance or assets there is no need for any kind of "product"
What you need is a trust with two trustee's who aren't also guardian to your kids.
Ours is set up that way with distributions at the age of 21 and finally 30.
Not only do you need to be able to provide for your child but there might be a situation where the guardian's home isn't big enough. If that's the case the trustee's could agree to fund the part purchase of a larger house (and perhaps the costs as the guardian might not have to move otherwise) with the trust retaining a % interest in that property. Lots of permutations!
Finding the right guardian and the right trustee's isn't easy. In my case the latter was easier than the former! My sister would be good but lives in New York which is not ideal and my wife has two sister's neither of which would we want to subject our kids to living with!
As long as you have sufficient life insurance or assets there is no need for any kind of "product"
Ours is set up that way with distributions at the age of 21 and finally 30.
Not only do you need to be able to provide for your child but there might be a situation where the guardian's home isn't big enough. If that's the case the trustee's could agree to fund the part purchase of a larger house (and perhaps the costs as the guardian might not have to move otherwise) with the trust retaining a % interest in that property. Lots of permutations!
Finding the right guardian and the right trustee's isn't easy. In my case the latter was easier than the former! My sister would be good but lives in New York which is not ideal and my wife has two sister's neither of which would we want to subject our kids to living with!
As long as you have sufficient life insurance or assets there is no need for any kind of "product"
Definately see a solicitor and get this drawn up correctly. Wills are quite complicated and Sols can make sure its all taken care of correctly.
One suggestion which we have done is to have two trustees, so that the money cannot be spent without both sources (both of whom have your daughters interests at heart) agreeing to use some of the funds.
The more structured your Will, the less family in-fighting should the worst happen as you'll have made it crystal clear. Inheritence seems to bring out the worst in people.
One suggestion which we have done is to have two trustees, so that the money cannot be spent without both sources (both of whom have your daughters interests at heart) agreeing to use some of the funds.
The more structured your Will, the less family in-fighting should the worst happen as you'll have made it crystal clear. Inheritence seems to bring out the worst in people.
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