Wills - advice pleeease on trusts, guardians and protecting children long term

[moonjumping]

DP and I need to make wills. We have a DD (2) and expecting another DC this summer. We have a house and 2 flats (let out with large mortgages) which are in my name (largely for historic reasons/bought before we met).

I want to arrange things so that in the unlikely event of one or both of us dying before our children grow up our they are provided for. DP works freelance and so we are heavily dependent on my (steadier) salary. He wouldn't be able to afford the mortgage if anything were to happen to me. He is the most amazing dad but would not be able to look after two pre-school children and earn a reasonable living.

Im not sure whether to:

• leave the house we live in to DP and the other assets in some kind of trust for DCs (e.g. to provide for their upbringing and education in event of my death). If so how do trusts work? We have been talking about making one of my sisters a trustee together with DP, so she could support him in making decisions in best long term interest of the children;

• or leave all to DP and hope that he would manage to figure out what best to do for the children with support from family;

• take out life insurance (always thought it was a waste of money but maybe I should);

• ask another sister to be guardian for our children. We both have a few siblings but agree that my youngest sister (early 30s) would probably be the best guardian/parent if it ever came to that. Different sister from the one we would make a trustee because they are good at different things. Is that ok? She wouldn't have the financial resources to raise children. Is that where trust comes in? How do I broach this with my sisters - none of them have children (I hope they will..) But she is just the most sorted/best with children.

I know that some (tho probably not all) of this would be simpler if we were married. Maybe/hopefully we will one day..! But we need to sort this stuff sooner rather than later as in the unlikely event that something were to happen, the only thing that would make it more awful would be to leave a huge mess and no will... If/when we do marry want it to be for different/happy reasons. (My parents had painful divorce so not been in a huge hurry thus far in life!)

Thank you so much to anyone who has got this far and has suggestions or advice.

I think you need some financial and legal advice. From the inheritance tax point of view it would be better if you were married but you probably know this already. I know people like to think of marriage as romantic and that's fine but it's also practical too.

It sounds like it is worth you having life insurance if your DP could not support your children without your income. It's not terribly expensive and worth shopping around or using a comparison website to find the best deal.

You may already have life insurance as part of your work or pension benefits.

Life insurance definatly.
You could leave it all to each other but with a caveat that it gets left to the kids not any future partners.
Get some legal advice though, making a will is so important especially if you have kids.

Thank you everybody.. will look into life insurance. Any thoughts on how you leave stuff in trust and selecting guardians and trustees?

Hi OP I'm a will writer and have written hundreds of MNers wills. Have back to back meetings today but will come back to the thread later on and give you some pointers.

Moonjumping, you're right in thinking that you should have wills because at present your partner would receive nothing on your death as all of your assets are in your sole name (if I've understood correctly).

So your options are:

1. Make a will giving him everything and then go on to say that if he's died before you everything goes to your children. The danger of doing this is if he survives you and marries someone else your childrfen may not receive your inheritance.

1. Give him an outright gift of the house you occupy (or whatever house you occupy as your home on death) and give the rest of your assets to your children on the basis that if they're under, say, 21 at your death then those assets will be held on trust until they are over 21.

1. Give your dp a life interest in the house you occupy. This means that he can stay living there until he dies or marries someone else at which point the house is sold and the money goes to the children (or a trust as set out above). see this article which I wrote about this issue: www.marlowwills.co.uk/protecting-your-estate-from-care-home-fees.aspx . Although it starts by talking about care home fees which aren't relevant to you now, it also explains how this type of trust can ringfence one person's share of a property (or in your case all of a property) for the eventual benefit of the children whilst still providing a roof for the survivor.

1. Split everything between your dp and dc, with the decision about what should be retained and what sold resting with your trustees (executors).

There are pros and cons of all options. My best advice would be to make a will now but think of it as a 5 year plan and revisit it after that time to see how things have panned out and whether you wish to make any changes

If you get married then usually your will is automatically revoked. When I write wills for unmarried couple, I always ask if they're planning to marry and if so, put in a clause to say that the will remains in force if they do marry.

The other thing to consider is that if you remain unmarried there are tax considerations; if you do marry and give everything to your husband, your inheritance tax threshold of £325k is carried over and added to his when he dies so tax is only payable over the joint threshold of £650k.

I always advise clients to appoint a guardian who isn't also and executor/trustee, partly to spread the burden but also to avoid a potential conflict of interest.

Hope this helps but ask if you have any more questions!

Mumble chum - thanks, hugely helpful. I think would probably want to go for 2 or 4. But will PM you to discuss and see if you could do the wills for us.

On 1 my concern is probably less about whether assets would go to a different family in the event of remarriage as DP v moral person and I think he wd want to do the right thing. More about financial management skills and therefore whether better to have family member who is stronger on this side tied into the decisions, particularly to ensure that right decisions were taken to ensure long term financial security for kids, money for uni etc.

Still not sure how all this would help in terms of providing then with an income. Eg would 2 mean that things completely tied up until children reach 21. Or cd trustees take decision to sell if money was needed for their upbringing. Perhaps that is where life insurance comes in and it sounds as if I shd get some.

Wd definitely want a clause on in event of marriage and hope we get there well before any of the sadder eventualities! ;-)

Yes, there are ways of putting assets into trust to provide an income for the children. This does tend to complicate things considerably, though.

I agree that getting some life insurance sorted out would be a very good idea. Make sure that the insurance policies are written into discretionary trusts by the insurance company. That way, they won't be counted into your estate which means that inheritance tax won't be payable on them.

Please do feel free to PM me. We cover all of England and Wales.

You do need to consider your partner re-marrying. It is nothing to do with morals but if married in the future then without a will his whole estate would go to his wife. My friends father died in this situation and she/her sisters got nothing (not even personal items). The new wife considered it to be her rightful property - and by the law she was right. Cover all bases!

Yes, Tricot 39 is absolutely right. See the article I linked to in para 3 of my response of yesterday. The article explains how life interest trusts work to avoid that situation arising.

Mumblechum - thanks for helping us sort all this out and get wills done. Wd highly recommend Mumblechum for other MNers who need to sort this stuff out!

It was my pleasure Moonjumping, all the very best with the new baby!

Mumblechum just a quick question.....if i specified an age on a trust deed for my children, is this legally binding? This has been queried by a solicitor friend, in that if the children wanted to take over the money at 18 there is nothing i cam do to stop this.

The usual age is 21, and although there have been plenty of cases where the testator has specified a much later age, eg 30, before children can inherit, which the court has ruled unreasonable and has changed the terms to let them have the money earlier, it is very unlikely in my view that a court would overturn a more sensible age (21 is the usual).

So the short answer to your question is, the children can't simply take money from the trust before the age you've specified. They may get a court to change the terms, but usually if they need some of the money before then it is up to the trustees to use their discretion to provide part payments.

Sorry that wasn't really shorter!

Thank you, that makes sense. Don't want my DC to be richer than me at 18!!

No, having a 19 year old myself, the thought of him having a huge amount of money is a bit terrifying