Questions about guardianship and life insurance if there aren't any assets...

[stopbeingsilly]

If a married couple has children but no assets or estate (really, none!) what are their options to provide for the children if the worst happens?

I know we need to arrange life insurance policies and write a will expressing our guardianship wishes, but any advice about other things we need to consider will be much appreciated.

We've discussed guardianship with the couple we'd want to 'have' the kids, but (like us) they don't have much money and would need to rent a bigger house, etc. Is it possible for a life insurance payout to be split into regular sums and paid to the guardians for upkeep? Or perhaps an initial payment to allow major changes (bigger house, bigger car) then the rest goes to the kids at 18/21?

I've been googling this for ages but can't seem to find anything very clear. Even Martin Lewis hasn't helped me this time!

I would go and see a financial adviser who can recommend the best options for you. Your bank may have one in house who is tied to a specific life insurance company, or you can go to an independent. You're less likely to be charged if you go to your bank though.

There used to be plans available that paid out monthly sums in the event if your death, but I'm not sure if they exist any more. A level term assurance plan would pay out a specific lump sum, and you can put them in trust so the money will be allocated to who you specify. So you could have a plan which pays out to the guardian, then another ring fenced for the children when they are a certain age.

I'm a will writer and this isn't as unusual a situation as you might imagine.

You should certainly make wills to cover guardianship but also the chances are that by the time you have both died (statistically when you're in your mid to late eighties!), you will have built up some assets even if only by way of inheriting from parents.

In the very unlikely event that you both died before the children were grown up, so were cared for by the guardians, your trustees would use their discretion to pay whatever was reasonable out to the guardians for the children's benefit. If there was anything left in that trust when the children had grown up then it would go to them (usually at around 21).

If you need any more info, feel free to PM me

You should definitely avoid specifying specific sums to go to the guardians; they will need a much smaller amount if you both die shortly before the children are adults than if they're little, obviously.

Really useful mumble, thank you! Probably a silly question (again) but who would be the trustee?

The trustees of the will are two people who you've chosen.

Trustees of a life insurance policy are company trustees, however rules vary depending on the insurance company as to whether they act as trustees themselves.