Having a child is one of the greatest moments in your life, but children bring with them a few extra expenses. What if one, or both parents were to die, would your child’s future be protected?
Some expenses to consider:
- Mortgage or rent - the mortgage or rent still needs to be paid, even if a parent passes away.
- Debts - any joint loans or credit cards will need to be paid by the surviving partner - finding the money to pay these off can be difficult for just one person.
- Everyday essentials - they include food and utilities such as gas and electric, which can quickly become a burden.
- Childcare - as a parent, you’ll want to ensure your children are well cared for.
- Education - further education is expensive with student debt at all-time highs, financial support from parents is usually essential.
How Can I Ensure that the Above Expenses are Taken Care Of?
Put Yourself First
This means reducing debts such as credit cards, loans or mortgage as well as planning for you own retirement. Otherwise these liabilities will fall to your family to deal with after you’ve gone.
Once you’ve got debts under control, then you are in a position to start saving and putting money away. It may make sense to save for your children in a tax-efficient Junior ISA to put the money in their names rather than as part of your estate. Starting when your children are young means that any funds have longer to grow.
Protect Your Income and Home
It is essential to protect your income and home in case anything happens that could risk your family’s financial wellbeing, such as illness, injury, or premature death. It is crucial to consider mortgage or rent protection, income protection, life insurance, and critical illness cover.
Make a Will
We always recommend that you have a Will in place. If you have young children, you state in your Will who you would like to be their legal guardians in the event that both their parents have died. The guardians would make day to day decisions regarding their care.
Where you are leaving your estate to your children, you name in your Will who would manage assets for the children until they are old enough to inherit, these people are called your trustees.
This is an important role as your trustees would decide what access your children have to funds and how these funds are managed. The trustees and the guardians can be the same people but do not have to be. It is important that you choose trustees that you are confident could manage the funds effectively for the children. You can have a maximum of four trustees, and so this can be a combination of relatives, friends or a professional such as Nockolds Solicitors if required.
The youngest your children could become absolutely entitled to funds from your estate would be 18, however it is possible to increase this age (for example, to 21 or 25) if you do not feel your children would be financially mature enough at 18.
Assets would then be held in a trust for the children until they reached that age. Funds can be given to the children prior to this, for example if they want a new car or to go to university, but this would be at the discretion of the trustees. The trustees decide what provision is made for the children’s maintenance, and it is likely they would pay a monthly allowance to the guardians to cover the cost of their care.
You may be asking the legal guardians and trustees to take on this role for many years in the future and so it is important that you consider who to appoint carefully and check with them that they are happy to undertake the responsibility.
For new parents, there’s so much going on but protecting the future of your children is one aspect which shouldn’t be ignored. Planning is crucial in making sure the financial future of your family is secure should the worst happen.
Saving, Insurance and making sure you have a valid Will in place are some of the ways you can help to provide the financial protection your family needs in the event of your death. Speak to a member of the team to discuss your individual circumstances and find out more.
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