There are certain financial boxes we all need to tick no matter what our adult age. Having children raises the stakes somewhat, and from the second they arrive you’ll find yourself contemplating their financial future.
Protecting Your Children’s Future
Putting plans in place for your children is part of any parent’s responsibilities. Making sure they’re cared for in the future takes some planning.
You might want to make investments for them from an early age, but what’s really important is to ensure that they’re covered and financially safe in the event of you experiencing serious ill health or dying. Who will take care of your children should the worst happen to you or your partner? Who will pay for their education and put a roof over their heads? Who will execute your will and ensure it’s distributed according to your wishes? These are all important concerns you need to sort out as soon as possible.
Where do I start to get my family financially protected?
It’s a cliche, but the first step is the most important, and it doesn’t really matter where you start as long as you get it done. If you are still daunted, consult a professional (preferably one that understands finance, tax and the law – hint hint!). They will be able to help you get everything squared away and give you peace of mind.
Overcome the emotional barriers
Even if you have a very open and honest relationship with your partner and children, talking with them (when appropriate) about what happens after you pass away can still be very awkward for everyone concerned. Neither you or them want to face the fact that, eventually, you will no longer be there for them. But that conversation is still essential.
Key to this talk – or talks – is to find a suitable time and space where you won’t be disturbed. What to talk about? They need to know anything you’ve put in place for them. -Who is your life insurance policy with? Is there a will? They also need to know where they can find key documents. You also want to provide time and space for your loved ones to ask any questions they may have.
What does a guardian do?
If you should die before your children reach the age of 18 and adulthood, they can end up going into the foster care system if you haven’t appointed a legal guardian for them. There is much to consider when doing this, such as where the guardian lives, if they have children of their own and does their way of raising children match yours? You’ll want to ensure your children aren’t just financially secure, but also happy.
Beyond that, the legal process of appointing a guardian is similar to that of drawing up a will. It’s a legal document that will need to be drawn up and witnessed. It’s quite common for people to include the appointment of a guardian in their will. One last, but very important point – you’ll need to ask the guardian’s permission. You want your child to have a guardian who would be glad to raise them in your absence.
Writing a will
A will is important even if you don’t have children – and you should definitely write one if you haven’t already – but there’s an extra level of complexity if you do have offspring. If they are under 18, you can leave them something in their will, but the law says they don’t have the ‘capacity’ to receive it until they are 18 years of age. Such bequests will be held ‘in trust’ until they come of age, by trustees who you will name in your will.
If your children are over 18 and you don’t leave a will, that means you die ‘intestate’. Your estate will be distributed by the court, and it may be that it’s divided equally between all your children, even if that doesn’t accord with your wishes. They’ll also receive their inheritance at age 18 – whereas if you leave a will you can stipulate at what age it’s paid. You may feel your inheritors won’t have the necessary maturity to receive a large sum until 21 or older. A will lets you control that.
The importance of life insurance
The crux of much of this planning comes down to whether or not your children will be cared for should you pass away. If your spouse remains alive, things may be fine, but then you must consider things such as stepchildren and how rules around inheritance differ for them. What if you and your partner were to pass away at the same time? This is why another key element of planning for your children’s future is life insurance.
Life insurance comes in different shapes and sizes but, put simply, it’s about a safety net for those who rely on you. Upon your death, a lump sum will be paid out to the beneficiaries, unless they are under 18. If that is the case, the money will be paid to trustees named by you to look after until they become adults. When taking out a life insurance policy, you’ll want to get expert advice and consider factors like how much money your children would need to live on, educational costs and more.
How else can I protect my children financially?
In addition to making sure that the i’s are dotted and t’s crossed on your will and other paperwork, it’s also worth considering other insurances such as critical illness cover. This can help to provide benefits should you fall seriously ill and be unable to work – you would receive a payout that can help to look after you all.
Another key consideration in this time of blended families is to make sure children are written into a will, rather than you trusting your partner to distribute the inheritance. This is a common issue when you and your partner have children from former relationships – it may be rare, but some people that inherit do occasionally disinherit their stepchildren. The simplest way to navigate this minefield is to be explicit about your wishes and to seek out help from experts.
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