Having just returned from maternity leave, the juggling between professional and personal responsibilities has officially commenced. I have two young children – Alexander (3 years old) and Robin (1 year old) and many of my friends and family are in the same position with babies, toddlers and young teenagers.
While there are a lot of things to think about with childcare, household chores, working – I cannot stress enough the importance of putting in place a will and power of attorney and thinking about your children's futures.
Will
We encourage everyone to put a will in place but particularly those who own assets (such as a house or property) have a spouse or partner and children. A will instructs how you wish your estate (i.e. everything you own) to be distributed and who you wish to receive it. There are some clauses included in a will that are particularly important for young children.
Trust provisions
If you leave your estate to young children, they will be entitled to receive it when they attain the age of 16. Depending on the provisions of the will, if they are below the age of 16, the accountant of court may become involved, or your executors may have some very limited powers to hold the estate. For young children particularly, we would advise you include a young beneficiaries trust in your will. This means that funds can be held for children by your executors/trustees until they attain an age of your choice – such as 18, 21 or 25. The funds would not be 'locked away' from the children and your executors/trustees would have the ability to distribute funds to the children before the allocated age. It is not until they attain the nominated age when they receive their whole interest in the estate.
Guardians
It is also important to include a provision to appoint guardians for children if both parents pass away while the children are under the age of 16. This ensures that you choose who will be responsible for your children and who will look after them following the time of your death. If there is a young beneficiary's trust included in the will, your guardians and executors/trustees can be the same people, or you can appoint different people in each role and they can work together to manage and release funds from the estate for the children's benefit.
Power of Attorney
A power of attorney allows someone else to 'step into your shoes' and act on your behalf in the event you become incapacitated and unable to look after yourself and your affairs. Many presume that a partner or spouse has an automatic right to make these decisions, but that is not the case, and a formal document is required. This can be two separate documents, one dealing with your financial affairs such as your bank accounts, your house and your tax affairs (a continuing power of attorney) and one dealing with your welfare and making decisions about what care and treatment you should receive (a welfare power of attorney). Alternatively, you can include both financial and welfare powers in one document and you can appoint the same individuals as your continuing and welfare attorneys, or different individuals for each role. If you don't have a power of attorney and lose capacity, someone would need to apply to the court for a guardianship order in order to act on your behalf, which can be a costly and time-consuming process.
If you lose capacity, a power of attorney can make it easier for your family to make decisions on your behalf.
Lifetime Trusts
We advise clients to consider a lifetime trust (which is different to putting one in your will, which only comes into effect after your death) to receive any large sums of money which you wish your family to benefit from – such as death in service benefits or life assurance policies. The trust acts as a protective vehicle to look after these funds for your family. This can be useful for inheritance tax planning, but also ensures that young children are not left with access to a significant amount of funds and they can instead be held for their benefit and managed by your appointed trustees who can distribute funds as and when required.
Our wills and estate planning lawyers at Brodies are more than happy to help you with preparing these documents as well as offering advice around supporting you and your family. For more information, please get in touch.
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