The payment from a claim could be made from the trust to the guardian or, if appropriate, to the children directly, to cover living and educational costs. If children are different ages, different amounts can be paid from the trust at different stages to suit individual needs.
The benefits paid into trust will be looked after by the trustees who will decide how to distribute the funds, or they could invest the trust fund for the benefit of the children. By writing life policies into trust, they will also be held outside the client’s estate for inheritance tax planning purposes.
Questions to ask clients:
- How can you ensure that your children’s funds would be managed properly if you died?
- Would you like to ensure the proceeds from a protection policy are paid quickly?
- Do you want to be able to make sure your children’s needs are looked after, even when you are not able to help?
Guardianship
One of the most important steps your clients can take in making plans for their children is to appoint a guardian. The death of one parent can create huge emotional and financial worries, let alone the death of both parents.
A guardian is an individual granted the legal authority to care for a child (or children) on the death of anyone with parental responsibility.
If parents do not specify a guardian and something happens to both of them, appointing one becomes the responsibility of the court. This can be a lengthy and expensive process and until that is concluded the children may be taken into care.
Additionally, after a decision has been made, children may be left with someone their parents may not have chosen.
Talking to your clients will help them think about who they would want to act as guardians to avoid legal complications and uncertainty of their children’s future care.
The role of a guardian is a serious undertaking, requiring the legal guardian to provide a home, with responsibility for the safety and wellbeing of the child, as well as making education and medical decisions, while offering financial support.
A guardian can be named by anyone who has parental responsibility. But who normally has parental responsibility? Well, mothers automatically have parental responsibility from birth. Fathers will only have parental responsibility if they are named on the child’s birth certificate or is married to (or subsequently marries) the child’s mother.
It is also possible for a father to get parental responsibility by entering into a parental responsibility agreement with the mother or through a court order.
With the total cost of raising a child to age 18 estimated to be £166,000 for a couple, and £220,000 for a lone parent, arranging a protection policy in trust for the financial benefit of a child with the guardian(s) named as trustees could provide some much-needed financial support for the guardian to bring up the child.
