The kids are alright: 5 ways to protect their financial future
Life admin can be a drag (we've got allll the excuses!) but it can pay dividends if you do the right things - ticking these off your list will be the best thing you can do for your kids, trust us!
Looking after your children’s future isn’t just about making sure they eat their greens, brush before bed and do their homework, it’s also about protecting your assets. I know, I know, yaaaawwwn… but as parents we deal with the daily work/life juggle to give our kids a great life and set them up for the future, right? So why put that hard-earned cash, savings, or inheritance money at risk?
Luckily, Rachel Hyndman, partner in Debenhams Ottaway Solicitors‘ Wills, trusts and probate team has boiled down five key to-dos for safeguarding your family’s financial security. Get your head around them now, so you (and your kids) won’t have a big headache later down the line. You know it makes sense!
Write a Will
We can’t stress this one enough… making a Will is the only way to guarantee that your family will be supported financially and provided for in the way you want. Many mistakenly believe that if they don’t have a Will, their spouse will automatically inherit everything. And, if you aren’t married, your partner may receive nothing unless you have a Will that states otherwise.
If you do already have a Will (pat on the back to you!), you do need to review it regularly. Life is always changing – whether you buy a new home, get married, have children or get divorced – so it’s important to make sure your Will reflects these changes.
Appoint a Lasting Power of Attorney (LPA)
If you can’t make important decisions due to an accident or illness, you’ll need an LPA. This gives an individual of your choosing (your attorney) the legal authority to make decisions and manage your affairs on your behalf. Without an LPA it may be necessary to go through the complex process of applying to the Court of Protection before any decisions can be made.
There are two different types of LPA: Property and Financial Affairs, and Health and Welfare. It is advisable to make both, but they do act independently of each other. This gives you the flexibility to choose appropriate attorneys to manage your different affairs. Both types of LPA must be registered with the Office of the Public Guardian before they can be used.
Own a business? Get a BLPA
A business lasting power of attorney (BLPA) will cover the financial aspects of your business and is a very useful tool for anyone including partners in a business, members of an LLP, sole traders and directors. It ensures that if you, as a key decision maker, are unable to act, someone else can do so.
Without one, if you lose capacity to run your business through illness, or an accident, the business bank accounts might be frozen, contracts not completed, staff unpaid, and claims made against the company. The fallout can be very timely and expensive.
The person you choose needs to be someone who understands your business and how it operates. This could be someone already working in the business, (assuming there are no conflicts of interest) or a third party, possibly in a related field.
Draft a pre or post nup
As lockdown eases, couples who’ve been waiting patiently to tie the knot might finally be about the celebrate their big day, but many won’t have a pre-nuptial agreement on their wedding checklist.
It might not be the most romantic thing to discuss when planning for your future wedded bliss, but a pre-nup can be a very effective way of protecting the assets you take into the marriage.
This contract between couples who are about to marry confirms ownership of assets, treatment of future earnings and potential division of assets should the marriage break down. They are particularly important if you have children from another relationship or if there is a significant imbalance of wealth.
If you’re already married, you can get a post-nuptial agreement which would cover you if you your circumstances have changed since getting hitched, for example coming into an unexpected inheritance or a major career change.
And if your children stand to inherit significant family wealth, you may want to encourage them to have a pre-nuptial agreement if they’re thinking about getting married.
Set up a trust
Trusts can hold a wide range of assets from property and shares to family heirlooms. And there are many types and reasons to set one up, from directly providing for your children’s future, to protecting a business or assets from a relationship breakdown, or to provide support to those who may be vulnerable or unable to manage their own affairs.
The most common type is a discretionary trust, where – as it says on the tin – the trustees (those who run the trust) have a discretion over who and how to benefit the beneficiaries. There are also bare trusts, disabled person trusts, bereaved minors trusts, and life interest trusts to name a few. To make sure you choose the right trust for you, it is important that you get professional legal advice before you put any plans into action.