How to make a Will
Many of you will take care of your dependents – often a spouse and/or children – by making a will. If a parent dies without a will either a surviving spouse is entitled to two-thirds of the estate and the children one-third or, if both parents are deceased, the children will be equally entitled to the entire estate. But what happens if your children are young and need more than just financial security?
The recommended will for parents of young children is a will trust. Parents can choose a guardian, provide for each child depending on their circumstances and appoint the right people to manage the assets until their child(ren) old enough to do so for themselves. Like any will the will trust will appoint executors, but they will also act as Trustees.
Executor and Trustee – The Difference
The role or function of the executor is to take all the necessary steps to obtain the Grant of Probate. Once this happens the trustee manages or looks after the assets until the children reach the age when they become entitled to the assets in their own right. The age parents usually decide on for a child’s financial independence is 21 or 23.
I always say to my clients – choose someone that you know, like and trust to make the right financial decisions for your children. The trustees, after all, will have control of the purse strings.
The next major decision is the appointment of guardians for your children who are under 18. This is probably the one of the most difficult decision that any parent will have to make or face, but the consequences of not doing so make it ever more important for parents to actually take the step. Generally speaking I advise parents to make sure that your children know the potential guardians; that they have some form of relationship with them. If possible try to choose a guardian that lives close by so that the children can stay in their school and maintain their friendships and other close relationships. Sit down and discuss the situation with the potential guardian and make sure that they are happy to act as guardian. Remember that when you appoint someone as a guardian that does not mean that they are automatically entitled to custody – day to day care – of the child or children. If you want someone else to look after your children on a daily basis then it is important that you specify this in the will trust.
Trustee and Guardian – The Difference
It is very simple – the Trustee can be likened to the money manager and the guardian’s primary concern is the welfare of the children.
Status of Money and Property
The guardians, for one, would be in a very difficult situation if the assets were untouchable until the children reached 21 or 23. The trustees have many powers and can make payments out of the trust if it is required for the children for, for example, school or college. For this reason I advise parents to assign different people to the roles of guardian and trustee to avoid a potential conflict of interest when it comes to financial decisions.
If Your Child has a Disability
In this situation a parent would be advised to set up what we call a discretionary trust will. The will directs the Trustees to use the money or assets for the maintenance of the child or children. The Trustees have absolute discretion how and when the money is used, if at all. With a discretionary trust the child will never become entitled to the money or assets.