Trusts for Children
When deciding how best to provide for your minor child's future it is important to choose a vehicle that can be trusted to protect the assets that you wish to pass down to them. At the end of the day, most parents wish to give their children a financial head start when it's time to go to university or invest in a starter home.
Trusts are useful vehicles which can assist greatly in succession planning. They offer a large degree of flexibility for fit and healthy minor children, but also for those children with disabilities, or those who are classed as vulnerable adults.
You can establish a children’s discretionary trust in your lifetime or by your Will. The latter can be very useful in providing for young children. It can be accompanied by a letter of wishes from you setting out what you want to happen to the trust fund. You can change the letter as many times as you like in your lifetime, as circumstances change. You do not have to change your Will when you change the letter, unless you want to.
If you have young children, you most probably will not wish for those children to inherit substantial assets at a young age. You most likely will prefer for them to have developed a degree of maturity, have established careers and have an understanding of financial matters, before they inherit anything of substance. In addition, if your children are very young it is difficult for you to anticipate their future needs. Discretionary Will trusts offer a “wait and see approach”, enabling you to choose people you trust to manage the trust fund for your children’s benefit and pay the fund to them when appropriate.
A discretionary Will trust is often the best method for providing for vulnerable children. If you have a child with a disability you face a number of difficult issues in making provision. On the one hand you naturally want to ensure that anyone looking after your child, once you have died, has sufficient resources and flexibility to meet the changing needs of your child. On the other hand, it is difficult to assess future needs and you will also want to ensure the role of the state is not comprised by giving money outright to your child.
In dealing with these variables, the discretionary Will trust structure offers huge flexibility to adapt to your child’s changing needs. It may also be possible, depending on the capacity of your child, for him or her to be one of the trustees and thus have an input into the decision making process.
A discretionary Will trust is also a means of providing for adult children who may sadly suffer from drug, alcohol, gambling or other addictions, without the risk of funds being depleted due to reckless management.
Discretionary trusts can assist greatly in implementing your wishes with regard to your succession planning. They offer a good degree of flexibility to deal with your changing needs, and should be considered by anyone with children.