Executors, Guardians, Trustees & Attorneys – Part 2 - By Lynch Solicitors Ltd

The next major decision that has to be made is the appointment of Guardians for your children who are under 18.

This is probably one of the most difficult decisions that any parent will have to make. The consequences of not doing so make it even more important for parents to actually take the step.

If you have young children, you need to appoint someone to look after them.

This person is a Guardian who is in loco parentis to your children.

It is important that the person appointed as Guardian is someone who you would trust to look after the best interests of your children.

Ideally, it should be a job given to two people to act as Co-Guardians.

You should make them aware that they have been appointed as Guardians in your Will and get their agreement to be your Guardian.

It is advisable to discuss your hopes, plans and ambitions for your children with them.

It is worthwhile to put your hopes, plans and ambitions in writing.

It is also a good idea to make provision for them to be compensated for doing the job.

What are Trusts & Trustees?

The recommended Will for parents of young children is a Will Trust. The usual form of Will Trust has some basic features which can be developed or changed, depending on the circumstances of the family.

Firstly, the Will Trust will appoint Executors. They will also act as Trustees.

Trusts are a good way to provide for minor children, children with special needs or children with disability (or even 'wayward' children or children with addictions) or, simply, a way to manage how or when your family get a benefit.

Where children are under age, you need to have a way to look after the finances for those children before they come of age.

This is usually done by a mechanism called a Trust.

You need to choose someone you believe can manage money in the best interests of your children – called a Trustee.

In such a Trust, the children will normally take control of the finances when they reach a nominated age. This can be an age of your choosing.

Ideally, it should be a job given to two people to act as co-trustee.

It is advisable to get a person's agreement to be your Trustee and to discuss your plans for your children with them.

It is worthwhile to put your plans in writing.

It is also a good idea to make provision for them to be compensated for doing the job.

How do people choose Trustees?
Choose someone capable who you know, like and trust.

Remember, you will be handing over responsibility and authority to them to look after your assets until your children are of a certain age.

It is important to make sure that you are happy that the person has the ability to make the right financial decisions for your children.

So how do you set up a trust?
The creation of the Trust, at its simplest, happens when the parent directs in the Will that their assets are given to the Trustees and are to be held by them for the benefit of the children, and once the children reach a certain age then the Trustees must handover the trust property to the children.

In another form of Trust, called a Discretionary Trust, Trustees will have absolute discretion as to how much, when and who is paid.

A Discretionary Trust may be a good way of providing for vulnerable children or children with disabilities.

Can the money or property be accessed by the Trustee for the children before they come of age?
The Trustee can pay out a portion of the capital or income if it is required for the children. E.g. for school or college expenses.

If the Guardian needs money to get the children back to school items or money for college, then the Trustee has the power to make a payment out to fund those expenses.

While the Trustee can also act as Guardian, it might be worthwhile assigning the roles to different people so that you don't have a Guardian with a potential conflict of interest if they have to make financial decisions.

Discretionary Trust for a child that has a disability or special needs?
It can be useful in providing for children with special needs, disabilities, mental health issues or persons suffering from addiction as it allows for the safe management of their inheritance.

In that situation a parent would be advised set up a Discretionary Tust will. The Will directs the Trustees to use the money or assets for the maintenance of the child.

The beneficiary of the Trust Will is not automatically entitled to the money or assets in this case.

The Trust can operate to protect their state benefits while creating a fund for their benefit.

The Trustees are obliged to use the trust funds for the benefit of the children.

In a Discretionary Trust, Trustees will have absolute discretion as to how much, when and who is paid.

The Discretionary Trust structure offers flexibility consistent with a "wait and see" approach by the Trustee.

We would advise that a Trust Will be accompanied by a Letter of Wishes. This sets out what parents would like to happen with the trust fund. This is a very individual letter from the parent to the Trustees. It may include, for example, how the trust fund should be divided or at what age the children should benefit.

So where do you go from here - Estate and succession planning? 

Estate planning is planning the transfer of assets to the next generation.

While making a Will is certainly the first step in planning ahead, there are other issues to consider.

In certain circumstances, it might be appropriate to make gifts to the next generation during your lifetime.

For instance, you may wish to transfer your business or farm to one of your children who is working in the business or on the farm.  You may want to give your children a benefit now as they start out in their adult lives to help get them set up.

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