Your Will and Inheritance / your children
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| Introduction |
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| This article is one of a set about wills. While some of the information pages explain various pieces of legislation which are relevant to making a will, others explain a particular aspect of will writing that you might like to consider. |
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| This article explains the role legal position of your children when you die. It specifically addresses the Inheritance (Provision for Family and Dependants) Act 1975 |
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| The Inheritance (Provision for Family and Dependants) Act 1975 |
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| You do not have to leave property to your relatives or equally among any class of relatives, but beware of this. This important Act provides that certain people can apply to the court to claim a share (or larger share) of your estate. These people are: |
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- Your former wife or former husband who has not remarried;
- A different-sex partner who has been cohabiting with you for two years immediately prior to your death;
- Your children;
- Any person who you treated as a child of your marriage;
- Anyone who considers that he was dependent on you immediately before your death.
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| What is reasonable depends upon all the circumstances of the individual case. The Wills Trusts and Probate wills system provides for you to make a statement explaining why you have left little or nothing to a particular person. Example statements are available for you to use. Such a statement does not of itself defeat a claim, but may well have that effect in enabling your executors to provides reasons for your decisions whether or not a claim comes to court |
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| Appointing guardians for your children |
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| If you have or may shortly have children, you will of course want to consider who will care for them in the event of both parents dying. Guardianship of children is dealt with by The Children's Act 1989 as amended by the Law Reform (Succession) Act of 1995. You can appoint a guardian by will only if you have “parental responsibility” for the child. That means all the legal rights, duties, responsibilities and authority of a parent. |
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| These people have parental responsibility under the Act: |
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- The mother and father of a child who were married to each other at the time of the child's birth;
- The child's mother whether or not she was married to the father at the time of the child's birth;
- The father of a child who was not married to the mother at the time of the child's birth but who has been given parental responsibility by a valid parental responsibility agreement entered into with the child's mother;
- A person granted parental responsibility in relation to a child by a court;
- A guardian appointed in accordance with the Act.
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| Here is more information from the Act: |
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- The father of a child who was not married to the child's mother does not have parental responsibility in relation to a child merely by being the father;
- A mother and father who were not married to each other at the birth of a child may enter into a written agreement in a prescribed form to give the father parental responsibility. Alternatively, a father can apply to court for custody of his children;
- A parent who has parental responsibility or a guardian can appoint another to be the child's guardian in the event of that parent or guardian's death.To all intents and purposes that appointment is best made by will;
- The appointment of a guardian by will does not reduce or remove the rights of a parent with parental responsibilities (whether the testator before his death or the other parent at any time). It takes effect when such person's rights have terminated.
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| Gifts to young people and trusts |
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| There are several issues here, which we will cover individually: |
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| At what age is your donee going to be trustworthy enough to make best use of your gift? |
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| Each one of us is unique. There is no knowing what circumstance may affect our lives or how our attitudes may change. So you could argue that whatever age you choose, it will be too soon or too late. However, we suggest it is indisputable that on average, people tend to be more careful with money, and put it to better use, as they age from 18 into their twenties. All the WTP trusts empower the Trustees fairly widely, but most assume that a beneficiary receives income at age 18, but capital not until age 25. The actual choice is entirely for you, the testator. You can even provide that income be paid to parents of younger children, effectively to hand to them. Furthermore, most trusts provide for the trustees to be able to use income or capital of the trust for “education and training”, a definition which we guess has been stretched to encompass some unusual activities over the years! |
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| Who should hold money for them until they reach the age you specify? |
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| Your options are: |
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- Give them the money as young as you legally can;
- Give the money to their parents (income at least);
- Appoint trustees to hold the money and keep it invested.
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| Can parents say no? |
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| Parents may not be good at saying “no” when a child wants the money for an educational trip to learn about cannabis in Ibiza. But who wants to wait until the ripe old age of 25 before they can lay hands on their inheritance? Perhaps you can invent some suitable compromise whereby you specify in precisely what circumstances the money can be distributed. The more precisely you specify, the easier it will be for your trustees to refuse an offer in contravention of your wishes. Common examples of such occasions and purposes are: |
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- Reach age 18, 21, or 25;
- On marriage;
- On birth of a child;
- On buying a house;
- On going on “expedition”, usually abroad;
- On attending university or other higher education facility;
- On leaving university.
- And so on.
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| Discretionary trusts |
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| Trustees can hold money and property either at their discretion as to distribution of capital and income, or on behalf of some specified beneficiary, either outright, or subject to a condition, such as the attainment of a particular age. The first is a “discretionary trust”. The second is an “interest in possession” trust, even while the condition remains unsatisfied. |
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| In law, a beneficiary can demand to be paid his entitlement immediately the trust conditions are satisfied, or at age 18 if none are specified. However, legal actions to enforce this are few and far between. Eighteen year olds are not likely to sue a trustee aunt or parent! |
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| These are possible advantages: |
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- To prevent a spendthrift from having access to all of the capital at once. A “spendthrift” may simply be a young person who has never previously had access to a large sum of money.
- To prevent a large amount of cash falling into the hands of an ex-spouse, through the divorce courts. Because there is no interest in possession, a beneficiary cannot be said to “own” any part of the fund. Accordingly, none of it can pass to an ex- spouse (or trustee in bankruptcy). However, the divorce judge, in considering the division of other assets, will take account in broad terms of the likelihood of the beneficiary receiving a distribution in the future.
- To provide flexibility and freedom to the trustees to use the money in what they see as the best interests of the children. Capital can be distributed over many years.…..And possible disadvantages:
- Trusts are no longer subject to the tax advantages of former years. Successive chancellors tighten the tax net. You must take professional financial advice on how a trust will be taxed before you set it up. However, it is unlikely that tax will ever be greater than that payable by a higher rate tax payer.
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| Related documents: power of attorney - legal wills - general power of attorney |
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