Updating our will. How will DD's get money if DH and I die?

[beatie]

DH and I are about to update our ill, since we still haven't included dd2 and she is 9 months now!

We have life insurance to pay out a lump sum should one of us die. If we both die and that lump sum goes to our designated guardians for the DDs, do we need to specify how it is spent or do we leave that up to the guardians.

I haven't got our old will out to see what we wrote first time round. We have my parents down as guardians at the moment so I suppose I didn't see it as being a problem. My dad is very finanically astute so I know he'd do what was best for the children.

I'm thinking of changing our guardians to my brother (who has 2 children) or DH's brother (who has no children) and having them be guardians feels like more of an imposition on their lives, even though I know they'd be honoured and happy to do it. I feel I'd need to get a balance between insuring guardians are not out of pocket but ensuring the DDs end up with something once they are no longer dependents.

I'm curious to know what other people have done.

Thanks if you read this far.

'insuring' should read ensuring.

i think you normally set up a trust which would dish out the money as and when required. You should get legal advise though - we are currently trying to do our wills and think it is so complicated with kids!

beatie I suggest you do some maths. Work out what the life assurance sum would be then any assets you have eg equity in home, savings etc. Work out liabilities - cost of childcare, school fees home/utility bills. This will help you decide who financially can afford to best look after the children in your absence.

Guardians are the people who make decissions it does not mean that the kids have to live with that person.

You should get legal advice -- there's a form of words that basically means money can be spent to support the children but not just appropriated / frittered away. It's something quite technical, though (along the lines of "section blah-di-blah of the Rhubabrb Crumble Act 1929 applies").

you might want to consider whether your appointed guardians ought to be people who will probably outlive you - if you nominate your parents the chances are they will go before you anyway.

Beatie, you said you were curious what others have done.

Agree that it is a good idea to name a set of guardians who are not likely to predecease you.

You wanted to ensure that your brother/BIL as guardians were not out-of-pocket. What we did was make a specific cash gift to our guardians if they accepted the responsibility of guardians. Bear in mind you can name guardians in your will but they are not legally obliged to take up that role. This cash gift was given to them in their own right to spend as they chose, not for the benefit of our children.

We drew a distinction between the guardians (whom we trusted to take care of our children) and trustees under the will (who would manage the inheritance of any of our children who were below 18 at the time of our deaths). Our trustees were separate persons who would also get separate and specific cash gifts if they took up their role. This way, we felt that it would avoid any conflict of interest between who made the day-to-day decisions on bringing up the children (guardians) and who held the purse strings, particularly for big ticket expenditure (trustees).

The terms of the will gave full discretion to the trustees to manage the inheritance until the children come of age. But in a separate letter of wishes (which is not legally binding, only morally), we gave more detailed instructions about how we wished the trustee to use the money and assets eg proceeds of insurance to pay off mortgage, fund education.

If the value of your assets (including the house and proceeds from your insurance policy) exceed the nil rate band, currently 285K pounds but increases every year), then you may additionally wish to consider inheritance tax planning.

Sorry to add to my long post.

About financial hardship of the guardians, my approach was that anything to do with my children should be funded out of their inheritance ie their food, clothes, education, expenses. So in principle, my guardians should not have to bear the monetary cost of taking them in. I did an account of expenses (present and future), as Lasvegas suggested, and pegged the amount of life insurance to achieve this purpose.

Guardians only come in if both you and dh die young. In such tragic circumstances, I do believe anyone you name as guardian will be more than happy to step in - so try not to feel bad about the imposition. Of course, you trust them and are happy to leave your dds in their good hands.

Our solicitor advised us to write detailed Letters of Wishes for the children's guardian, detailing things like the type of education we had been planning (I'm keen on alternatives to the National Curriculum and the endless stream of tests and exams, for example) and any particular points to do with the way your children should be brought up - of course the guardians will do their best and it's not to control matters but they might appreciate knowing what you would have wanted. I think that's why we chose the guardians we did - because we felt they would bring the children up to be as happy and confident as possible.

Thanksyou everyone who has responded. Your detailed answers have given me some food for thought. I really appreciate your responses.