Legal Column – 14th November 2013
Parents of young children are advised to make a will trust so that if they both pass away when their children are young they have made provisions by appointing Guardians of their choice, ensuring that each child is properly provided for and that they have the right people in place to manage their assets.
Firstly, the will trust will appoint Executors who will also act as Trustees.
The role or function of the Executor is to take all the necessary steps to obtain the Grant of Probate.
The Trustees take over once probate has been granted and they then manage the assets until the children reach the age when they become entitled to them in their own right: usually 21 or 23.
Distinguishing between a Trustee and Guardian
It is very simple – the Trustees can be likened to the money manager and the Guardian’s primary concern is the welfare of the children.
Choosing a Trustee
It is important to choose someone that you know, like and trust.
Remember, if anything happens you will be handing over responsibility and authority to the Trustees to look after your assets until your children are of a certain age.
Make sure you are happy that the people you have chosen have the ability to make the right financial decisions for your children.
Choosing a Guardian
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, but the consequences of not doing so make it ever more important for parents to actually take the step.
Every situation is different and so the advice that I give depends on the circumstances of each individual, but, generally speaking, I would make the following points:
- Make sure that your children know the potential Guardians; that they have some form of relationship with them. This might be difficult when children are very young and have not formed strong relationships but as the years go by this will change and it is always an option to amend your will.
- If at all possible try to choose Guardians that live close by so that the children can stay in their school and maintain their friendships.
- Sit down and discuss the situation with the potential Guardians and make sure that they are happy to act.
- Remember that when you appoint someone as a Guardian that does not mean that they are automatically entitled to custody (the day to day care and control of the children). If you want someone else to look after the children on a daily basis it is important that you specify this.
Creating the Will Trust
After parents have decided on Trustees and Guardians the next step is the actual creation of the trust and specifying the powers that you are giving to the Trustees.
The creation of the trust happens when the parents direct in their will that their assets are to be given to the Trustees and are to be held by them for the benefit of the children until they reach a certain age – generally 21 or 23.
The trustees must then handover the trust property.
The Guardians would be in a very difficult situation if the assets were untouchable until the children reached 21 or 23.
The Trustees can pay out a portion of the capital of the estate or some of the income (deriving from the assets) if it is required for the children for example for back to school items or college expenses.
While the Trustees can also act as Guardians it might be worthwhile assigning the roles to different people so that a Guardian is not faced with a potential conflict of interest if they have to make financial decisions.
Trustees Powers – Assets and Money
There is little doubt that Trustees take on a very onerous task. Trustees have a duty to act in good faith and must make sure that they are not reckless or dishonest in dealing with the assets. The Trustees have powers to make investments, to sell assets, make payments out of the capital of the estate and to distribute the assets according to the children’s circumstances.