Beneficiaries on discretionary trust - confused

ashencircle

I'm a single parent and have a life assurance policy that I am putting into trust for my son. I bought the insurance from Legal and General and they have their own trust forms you can complete, but I have a couple of questions and speaking to their helpline didn't answer them fully.

I want my son to be the sole beneficiary (in a way), but want my family (who would likely become guardians) to be able to access the trust and withdraw money before he is 18 for his upbringing - anything from education, housing, holidays, first car etc. I trust their judgement.

My questions are:
1) the wording of the Discretionary trust seems to say that a range of people are automatically beneficiaries - my siblings, any surviving spouse as well as my children and grandchildren. I have written a letter of wishes but I know that's not legally binding - doesn't this mean others can make a claim on this money?

2) the list of people included as automatic beneficiaries doesn't include my parents, who are likely to bring up my son. Do I need to make them additional beneficiaries so that they can access money to spend on my son? Or will they be able to decide to withdraw the money if it is in the spirit of the trust's aim (ie being spent on my son) even though they are not named beneficiaries? My parents will be the trustees so does this give them the power for this?

I don't want to get anything wrong but the trust wording seems a lot more wishy washy than I expected it would be!

Any advice appreciated.

theoretica

I believe there needs to be a degree of wishy washiness/discretion in order for the insurance trust to definitely fall outside your estate and not be subject to inheritance tax - or potentially claimed by your creditors.  Making it legally binding to just your son would cancel some of the benefits.

Marcon

ashencircle said:

I'm a single parent and have a life assurance policy that I am putting into trust for my son. I bought the insurance from Legal and General and they have their own trust forms you can complete, but I have a couple of questions and speaking to their helpline didn't answer them fully.

I want my son to be the sole beneficiary (in a way), but want my family (who would likely become guardians) to be able to access the trust and withdraw money before he is 18 for his upbringing - anything from education, housing, holidays, first car etc. I trust their judgement.

My questions are:
1) the wording of the Discretionary trust seems to say that a range of people are automatically beneficiaries - my siblings, any surviving spouse as well as my children and grandchildren. I have written a letter of wishes but I know that's not legally binding - doesn't this mean others can make a claim on this money?

2) the list of people included as automatic beneficiaries doesn't include my parents, who are likely to bring up my son. Do I need to make them additional beneficiaries so that they can access money to spend on my son? Or will they be able to decide to withdraw the money if it is in the spirit of the trust's aim (ie being spent on my son) even though they are not named beneficiaries? My parents will be the trustees so does this give them the power for this?

I don't want to get anything wrong but the trust wording seems a lot more wishy washy than I expected it would be!

Any advice appreciated.

1. They are potential beneficiaries - nobody is 'automatically' an actual beneficiary - and it is for L&G to make the ultimate decision. In practice, if you have an up to date letter of wishes (and that means completing a new form every couple of years, not relying on one you sent in when you took out the policy and then forgot about!), and there is an obvious link ('I would like my only child, my son John, to have the proceeds 100%. If he dies before me, then I would like...... to happen').
2. If your son is under 18 when you die, then L&G would have to pay to someone they can identify as a responsible adult, because a minor cannot give 'good receipt' for the funds. Include a note on your EOW form saying that is what you'd like to happen. These EOW forms aren't sacrosanct - if there isn't a box for the information you want to supply, add an extra bit of your own. Just make sure the whole form has your name and policy number on any extra pages you add, and that you've signed and dated it.

The answer above explains why all this is necessary!

ashencircle

That's really helpful, thanks both for explaining!

getmore4less

If you really want particular people to look after your son while a minor if you pass

Make a guardian declaration.
Can be separate from a will.

Does the father still have parental responsibility