If I die can I delay children getting money until 21?

Ilovemarmitelots

I see lots of posts and information on the internet saying that brains aren’t fully formed until age 25 or later, so in this day and age why do child ISAs and bare trusts etc pay out at age 18 and is there a way to change it?

I’ve split with my ex and have minor children (6&10), I have a life insurance policy through work which I would like to go to them as it might be a deposit on a house. I’d like it to be given at 21 or 25 not 18 but according to the trustee law firm, that’s not possible. Apparently it has to be 18. My son is only 6 but based on how I was at 18 I don’t want him to blow it!

Has anyone found a simple, not ££££ solution?

For the rest of my assets is a discretionary trust the only answer? My dad had a will trust that paid out at 21 (I think) but I was told they aren’t recognised any more and a more complex discretionary trust would be required in similar circumstances if I die. My estate will only be £250k so not massive and I don’t want onerous legal and tax implications for the executer / trustees which will wipe it out over time.

I appreciate it’s a good problem to have, but if my children loose me before they are 18 they will have enough challenges so I’d like this to be a little something to help them not for them to blow it on booze or worse

elsien

Ilovemarmitelots said:

I see lots of posts and information on the internet saying that brains aren’t fully formed until age 25 or later, so in this day and age why do child ISAs and bare trusts etc pay out at age 18 and is there a way to change it?

I’ve split with my ex and have minor children (6&10), I have a life insurance policy through work which I would like to go to them as it might be a deposit on a house. I’d like it to be given at 21 or 25 not 18 but according to the trustee law firm, that’s not possible. Apparently it has to be 18. My son is only 6 but based on how I was at 18 I don’t want him to blow it!

Has anyone found a simple, not ££££ solution?

For the rest of my assets is a discretionary trust the only answer? My dad had a will trust that paid out at 21 (I think) but I was told they aren’t recognised any more and a more complex discretionary trust would be required in similar circumstances if I die. My estate will only be £250k so not massive and I don’t want onerous legal and tax implications for the executer / trustees which will wipe it out over time.

I appreciate it’s a good problem to have, but if my children loose me before they are 18 they will have enough challenges so I’d like this to be a little something to help them not for them to blow it on booze or worse

Financial education and preparation, rather than children having no clue they are in windfall until it hits their bank account.

Plus an acceptance  that what you think the money is best used for may not be in line with you then adult children’s. Who may value (for example) living and travelling abroad over buying a house at a young age.

I also remain unconvinced by the idea that brains are not fully developed to the point that it impaired decision-making until people are 25. Both in the past and now people may be married with a family by then and manage perfectly well.

Spendless

elsien said:

Ilovemarmitelots said:

I see lots of posts and information on the internet saying that brains aren’t fully formed until age 25 or later, so in this day and age why do child ISAs and bare trusts etc pay out at age 18 and is there a way to change it?

I’ve split with my ex and have minor children (6&10), I have a life insurance policy through work which I would like to go to them as it might be a deposit on a house. I’d like it to be given at 21 or 25 not 18 but according to the trustee law firm, that’s not possible. Apparently it has to be 18. My son is only 6 but based on how I was at 18 I don’t want him to blow it!

Has anyone found a simple, not ££££ solution?

For the rest of my assets is a discretionary trust the only answer? My dad had a will trust that paid out at 21 (I think) but I was told they aren’t recognised any more and a more complex discretionary trust would be required in similar circumstances if I die. My estate will only be £250k so not massive and I don’t want onerous legal and tax implications for the executer / trustees which will wipe it out over time.

I appreciate it’s a good problem to have, but if my children loose me before they are 18 they will have enough challenges so I’d like this to be a little something to help them not for them to blow it on booze or 

Plus an acceptance  that what you think the money is best used for may not be in line with you then adult children’s. Who may value (for example) living and travelling abroad over buying a house at a young age.

I completely agree with this. When my eldest went to Uni at 18 we gave him the money we'd saved for him - ok wasnt a huge amount around £1500 but it was all he (and we) had.

A year on, that money was gone. At face value it looked like he'd spent it socialising. He explained he'd been.bullied at school (and kept it from us)  at Uni he wanted a fresh start, to go out meet people and find a friendship circle and that's what the money had enabled him to do. 

Hes now 25 and doesnt regret at all that he spent his money this way at that point in his life. 

Cairnpapple

As you say in your first post, if you die before your kids are 18 they will have significant challenges, and money really can help.

To share a personal example, my mum became terminally ill when I was 19 and died when I was 21. I was just at the very tail end of student grants and at the very start of student loans, and luckily I managed to arrange my finances so that I didn't have to work during university term time, or in the summer when my mum died. In my final year when things were worst, I paid some extra to have ensuite accommodation in a quiet boring hall where I could focus on my final exams. I absolutely could not have finished my degree if I didn't have some financial headroom.

Of course your circumstances may be very different, for example you may be confident that your ex or wider family would be able to smooth things over financially for your children between 18 and 21. But I would say don't underestimate the advantage to a bereaved 18 year old of not having to worry about paying for driving lessons, a sensible car, not-terrible uni accommodation, private therapy, and the odd nice holiday with their mates. 

Ilovemarmitelots

Thankyou for the balanced views, it’s a viewpoint I hadn’t considered. It will be 4x salary so £50k each child which is a lot to just waste if they are frivolous but I take your points. 

My biggest fear is dying, as the children would live with my ex and I worry about how well they will be looked after emotionally let alone if they will be ‘financially educated’. 

I wanted to protect what I have built and to try to protect my children’s long term future from impulses of youth. Yes they may prefer travel, and be fully mature at 18 but equally they might be in with a bad crowd and a mess after loosing their mum so young. I’d hoped DCs would be more mature at 21 or 25 but maybe I’m overthinking it. 

Thankyou @Cairnpapple for reliving what must have been a hard experience, I’m sorry you went through that so young. I hope you are right and 18 will be fine. 

Cairnpapple

@Ilovemarmitelots it's clear you're being very thoughtful about this and I hope none of your planning is ever needed.

I can see that you're worried about your ex so maybe also do some thinking around which other of your friends and family could help your children if you did die early, and over time let the children know that Aunty Cassie is great with money and Uncle Max knows about medical things, and Ava and Jane would always have a room for them if they fell out with their dad as young adults. That would be a safety net whichever way you decided to go with their money. 

poseidon1

Ilovemarmitelots said:

I see lots of posts and information on the internet saying that brains aren’t fully formed until age 25 or later, so in this day and age why do child ISAs and bare trusts etc pay out at age 18 and is there a way to change it?

I’ve split with my ex and have minor children (6&10), I have a life insurance policy through work which I would like to go to them as it might be a deposit on a house. I’d like it to be given at 21 or 25 not 18 but according to the trustee law firm, that’s not possible. Apparently it has to be 18. My son is only 6 but based on how I was at 18 I don’t want him to blow it!

Has anyone found a simple, not ££££ solution?

For the rest of my assets is a discretionary trust the only answer? My dad had a will trust that paid out at 21 (I think) but I was told they aren’t recognised any more and a more complex discretionary trust would be required in similar circumstances if I die. My estate will only be £250k so not massive and I don’t want onerous legal and tax implications for the executer / trustees which will wipe it out over time.

I appreciate it’s a good problem to have, but if my children loose me before they are 18 they will have enough challenges so I’d like this to be a little something to help them not for them to blow it on booze or worse

Back in 2020 you created a number of threads along the theme of trust arrangements for your child to be funded from funds inherited  from your deceased father's estate. Did you ever following through and take advice as to what you could do for the child at that point in time, and is some form of  trust already now in exsistence? If so how much, and what are the terms of that arrangement.

I also see from those earlier threads that you have been pretty consistent in wishing to defer children's capital  entitlement well beyond age 18, which in my opinion is entirely your perogative.

Presently, you are looking at whether  your death in service benefits could be settled on trust for your kids, should you die in service.

 It seems a 'trustee law firm' has indicated that this is not possible. If you are in a final salary DB scheme where your death benefit is a multiple of your salary and payable subject to your EOW, the scheme trustees may well be limited with regard to their powers as to who they can pay, although I am aware that some schemes do have power to payout to a ' pilot trust' set up by the scheme member for that specific purpose.

However, if your pension scheme itself is DC rather DB, bear in mind there are proposals  as from 2027 for its value to be amalgamated on death with your estate and the collective gross value of both potentially liable to IHT.

As for your personal estate you could indeed bequeath those assets to an 18 to 25 trust, which is marginally less complex than a full blown discretionary, but bear in mind the nature of the trust (if discretionary) could end up losing your estate access to the Residence Nil Rate Band leaving just the current £325k as your IHT shelter. Not a good outcome, if your pension pot ( if you have one) may become IHT liable.

Finally, who would be your choice of trustees? Do you have trustworthy and financially literate people around you to assume that potentially onerous unpaid  role?  Professional trustees (solicitor or accountant) are expensive and whose costs could substantially impact on your children's entitlements depending on how long the trust were to run.

In short there  are options to meet your objectives, but certainly at this time neither simple or cheap. Respectfully the size of your estate does not appear to currently justify the cost and complexities of trusts to age 25.

Ilovemarmitelots

Thanks again @Cairnpapple it’s a sensible suggestion, I think I will sit down and do just that and maybe over time write a letter ‘just in case’.

@poseidon1 The trust I asked about a few years ago was a separate trust created from a will to benefit my older child. I did take the forums advice and got professional advice and ended up investing it in a bond through a financial adviser. 

This is a death in service policy not linked to a pension. As you say I’m probably over thinking it due to the amounts involved (i only really knew about trusts because of my dad’s will). The beneficiary forms came round work last week as we have changed provider hence this question. The HR lady said they would get the money 18 but I wondered if there were options to delay this.  I thought it was worth asking here as I got such helpful advice last time which guided me in the right direction.

I guess I just have to hope my children never have to benefit from the death in service and that if they do they are more mature than I was at 18. In the meantime I will try to educate and guide them as much as possible.

18 just seems to me to be too young to inherit someone else’s life’s savings but clearly that’s my view and not the view of most.

poseidon1

Ilovemarmitelots said:

Thanks again @Cairnpapple it’s a sensible suggestion, I think I will sit down and do just that and maybe over time write a letter ‘just in case’.

@poseidon1 The trust I asked about a few years ago was a separate trust created from a will to benefit my older child. I did take the forums advice and got professional advice and ended up investing it in a bond through a financial adviser. 

This is a death in service policy not linked to a pension. As you say I’m probably over thinking it due to the amounts involved (i only really knew about trusts because of my dad’s will). The beneficiary forms came round work last week as we have changed provider hence this question. The HR lady said they would get the money 18 but I wondered if there were options to delay this.  I thought it was worth asking here as I got such helpful advice last time which guided me in the right direction.

I guess I just have to hope my children never have to benefit from the death in service and that if they do they are more mature than I was at 18. In the meantime I will try to educate and guide them as much as possible.

18 just seems to me to be too young to inherit someone else’s life’s savings but clearly that’s my view and not the view of most.

Good to hear the trust from your father' s estate came to fruition. Even better that you went down the investment bond route as the trust investment.

If you do decide to leave your estate in  trust, investment bonds as the trust asset would be a good cost and tax effective option for the trust investments, although you would still need to think carefully about choice of trustees. 

Incidentally I share your view that 18 is too young, your concerns in my view are entirely valid and no need for you to bow to the consensus, but to act on those concerns does come at a cost and a degree of complexity.

Savvy_Sue

I'll just add - perhaps unhelpfully - that some people never grow into a sensible understanding and use of money at any age. 

We had one friend who just could not be trusted with cash in his pocket or a card in his wallet. If he had it, he spent it. £10 for the week's train fares? Oh look, a book by an author I haven't got. £100 to pay the dentist? Ah but there's this shiny new boy's toy in this shop ... One despaired ... 

Ilovemarmitelots

Thanks again @poseidon1 I might seek professional advice again on my own assets but it’s been useful to get a ‘steer in the right direction’.
@Savvy_Sue good point, but at some point the money would need to be paid out if I’m not around