Protecting your child’s inheritance

There are three ways to structure financial provision for your children upon your death.
 

Outright gifts
 

An outright gift leaves assets to your children without restriction. If the child is under 18, then they will not
 

be able to receive the gift left to them until they reach 18, meaning that the legacy should be held by the executors of your will as trustees until this time.
 

Age contingent gifts
 

Another option is to make the gift to your children contingent on them attaining a certain age, usually either 21 or 25 (depending on your preference).
 

The idea here is that if you die before your children reach the age at which they become entitled, the executors of your will (as trustees) will hold the assets you leave for your children until they reach the required age.
 

The trustees can distribute money to the children before they attain the specified age at their discretion, but when the child reaches the required age, they inherit the remainder of the balance of their share outright.
 

Discretionary trusts
 

The third option is a discretionary trust which gives your trustees the absolute discretion and flexibility to apply trust money to a class of beneficiaries.
 

Here the trustees have the power to forward the capital and income from the trust at their entire discretion to any one or more of the beneficiaries (which would include your children and your other descendants) as and when they feel it appropriate.
 

With this option, a letter of wishes can be prepared giving your trustees some guidance on how to administer
 

the trust. For example, you could give guidance on when you would like your children to inherit various


assets and which assets you would like them to specifically have.
 

Who should be the trustees?
 

It is recommended that you appoint people you trust implicitly to be the trustees, as their role comes with a lot of power and responsibility.
 

It is also a good idea to appoint the guardian of your children as a trustee because the money may be needed for the children’s benefit (such as school fees).

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