Article written by Megan Hayes – Mortgage & Protection Adviser
As a parent myself and knowing a lot of other parents it is clear to see that we all endeavour to be the best parents we can and do the best for our children. If we started to analyse this notion what would it look like?
Well as parents we make sure our children’s basic needs are covered, food, water, somewhere clean and warm to live etc. We go out of our way to make sure that their educational needs are met, the best school in the area, extra-curricular activities and sometimes even extra tuition or bespoke classes to meet specialist needs. We even go as far as to make sure that they are socially educated and competent, mother and toddler groups from almost day one, pre-school groups, again extra-curricular activities such as brownies and sports classes which of course then meets their need for exercise.
The common de-nominator in all of this of course is that we as parents are here and available, budgeting our money and making sure all these many, many needs are identified and ultimately met. Therefore the obvious question has to be what happens if you aren’t here? Who will meet your children’s needs then? Will they grow up as you always intended them to, receiving and experiencing everything you always hoped they would?
I think as a good parent this is something we should be asking ourselves and then knowing what the desired answer is. We should start by putting in place plans that would mean the desired outcomes could be met.
So apart from points already covered what else makes us good parents? Well below is one theory of an all-encompassing circle on being the good parent and if followed will mean that your children can still feel the benefits of having a good parent even if you are not here!
Protection. The start and the end of our circle. As the good parent you manage whatever income you have to meet those above mentioned needs, but obviously if you are dead that income which is ultimately linked to yourself, disappears. What then? The easiest way to ensure that the children can still feel the benefit of an income is to set up a life insurance policy, of which there are various types. The most relevant for this situation is probably the Family Income Benefit policy. Having this type of plan in place gives you and your family peace of mind that there will continue to be an ongoing income for a period of time that you specified, meaning the children can go on benefiting from your financial contribution even after your death. After all, if they have just lost a much loved parent do they really want to lose the standard of living they are currently accustomed to?
Trusts. Once you have made the decision to put in place some protection it’s time to protect that protection by making sure it has been written in trust. By making this very simple but effective decision you are ensuring that the money you are providing to your family is going to exactly where it was always intended. For example a Family Income Benefit policy being paid to a remaining spouse or grandparent in order they can meet your children’s needs as you always intended and as previously mentioned your children continue to benefit from your income. Alternatively it may mean that a life policy pays out into the trust, in doing so it avoids any potential inheritance tax and can be held safe and secure until your children are old enough to be entitled to the money. Again the age is something you can specify. Another benefit of putting a life insurance policy into Trust is the monies can be accessed without going through the lengthy process of Probate. Clearly these are very handy tools to have!
Wills. If you have taken the course of being a good parent (and even spouse!), provided protection and safeguarded that with the relevant trusts making sure the plans pay out where and when you so desired, then go that bit extra and make sure your children and spouse/partner get exactly what you would want them to in the worst case scenario. Currently 58% of adults do not have a Will and if they die it means they die intestate and this can cause all sorts of aggravation and extra costs for those left behind grieving. You can never assume that your property and all your worldly goods are going to drop into the lap of those you wanted. This means you saying ‘oh the kids/husband/wife/partner will get it all’ just won’t cut it. At the end of this blog I have provided a link to an flow chart to help you understand exactly who will get what and when if you do not make a Will.
Guardianship. A good Will can have many benefits such as potentially helping you save Inheritance Tax, making sure all your assets and belongings go to exactly whom you wish (this can be a very personal & sentimental process), you can delegate who you wish to administer your estate but most importantly you must appoint a guardian to care for your children if you are no longer here to do it yourself. Again ‘their Dad will take care of them’ just isn’t true. Now a days family units are very diverse and as obvious as it may be to you who should look after your children if you’re not here it may not be very obvious to the courts who potentially have to make those decisions for you if you haven’t appointed that all important guardian. Again I have included a link to a flowchart to demonstrate the possible outcomes. By creating a Will and appointing a guardian you are simply stating exactly what you wish to happen, obvious isn’t it really!?
I hope now you can clearly see how all four elements of the all-encompassing circle fit together. Obtaining the relevant protection and putting it in trust so that it will pay out to your children or those responsible for your children as appointed in you Will. Once you have done all this, it is important to keep each element under review in order to keep it relevant to your situation.
So ask yourself honestly, are you a good parent?
Rules of intestacy: http://www.brightadviser.co.uk/downloads/PC1415A.the-rules-of-intestacy-EW.pdf
Parental responsibility flow chart: http://www.brightadviser.co.uk/downloads/PC1775A.Parental-responsibility-flowchart-EnglandWales.pdf
The FCA does not regulate Trusts & Will writing and some forms of Inheritance Tax Planning.For Will writing we act as introducers only.