Partner Caroline Casagranda, in our Wills, Probate, Tax & Trusts team, discusses updates to your Will following the birth of a child or grandchild.
A new baby in the family! So much anticipation, excitement, exhaustion, overwhelming love for a new arrival, but have you considered who would care for the new arrival if something happened to you? Have you thought about what financial provision you would leave and who should manage this financial provision?
Appointing guardians
You can nominate who you would like to care for your children in the event of your death in your Will by appointing guardians. This appointment will usually take effect if there is nobody with parental responsibility for the child/children to look after them following your death (If one parent survives, the appointment of the guardian will only take effect after the death of the surviving parent). Parents should coordinate the appointment of guardians and the appointment should only take effect on the death of both. Further advice should be sought if divorce or separated as to the interaction of appointments of guardians in Wills if the appointments conflict.
Your wishes
We urge our clients to go one step further to include a detailed letter of wishes addressed to the guardians to set out your wishes, hopes and dreams for your children which you may not discuss with your guardians during your lifetime. You can use this to detail wishes in connection with their upbringing, who you would like them to remain in contact with, your aspirations for their education, their travel experiences and any wishes in connection with their medical treatment. This letter should be stored with your original Will.
Your estate
It is also important to consider how your assets will be dealt with in the event of your death. You may be clear that you would like the children to benefit, but what if you die when they are under the age of 18? Your executors will be responsible for looking after money, seeking financial advice and investing appropriately.
Parents – If children are aged under 18 years upon the death of a parent and will benefit from their parent’s estate upon attaining 18 years, provided certain requirements are met, this will create a trust known as a trust for bereaved minors. Such trusts will have special treatment for tax purposes. Provided certain conditions prescribed by HM Revenue and Customs ae met, parents can also create an 18-25 year Trust which attracts favourable tax treatment provided the child is entitled to all of the income and becomes absolutely entitled at age 25.
Grandparents
Grandparents – grandchildren are often left a cash gift or a share of a grandparent’s residuary estate, particularly given life expectancy and their children often being well established in life before they die. Unfortunately, money left to a grandchild will not qualify as a bereaved minor trust and there can be tax implications if the grandchild not absolutely entitled when their grandparent dies either because they are a minor or where there is an age contingency on the gift.
You should consider carefully who will be the ongoing trustees of the trust for the benefit of a minor. They will need to work closely with the guardians who may need to access money for the benefit of the children as they grow up. You should also consider having a separate letter of wishes to assist your trustees with decisions regarding investment and management of money on behalf of a minor.
Our team is ranked in the top tier in both of the UK’s leading guides to law firms, Chambers HNW and The Legal 500.
For further information on making or updating a Will, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
