Should Your Children Be Involved in Your Estate Planning?

It sounds entirely sensible. You are making plans for your family, so why wouldn't you involve your children? In many cases, you absolutely should however there are some important considerations to contemplate before you act!

Children can provide valuable support, help parents work through difficult decisions, and ensure everyone understands what is intended long before those arrangements ever have to be put into practice.

But there is an important distinction that families often overlook: Being involved in your estate planning is not the same as being allowed to determine it.

That distinction becomes particularly important when the planning moves beyond a simple Will and begins to involve trusts, asset protection, Lasting Powers of Attorney and decisions about how an inheritance should actually be controlled.

Why involving your children can be extremely valuable

There are many good reasons for having children involved in the planning process.

They can support you when important decisions are being made. Estate planning forces people to make decisions they may have avoided for years. Who should inherit? In what proportions? Who should act as an attorney? Who should become responsible for administering an estate? What should happen if a beneficiary dies, divorces, becomes financially vulnerable or simply cannot manage money?

Having trusted family members involved can make those conversations much easier. Children often know things about the wider family that parents have not considered. There may be changing relationships, grandchildren to consider, financial difficulties, health concerns or practical issues that materially affect how sensible a particular arrangement might be.

A good planning process should welcome relevant information. One of the greatest benefits of family involvement is communication. If your children understand why you have divided an estate in a particular way, why you have created a trust or why certain safeguards have been included, there is much less scope for misunderstanding when you are no longer there to explain it.

Sometimes the conversation itself is as valuable as the document.

Understanding Responsibility

Good legacy planning is not merely about transferring money. It can involve trusteeship, property, family businesses, investments, vulnerable beneficiaries and responsibilities extending across several generations.

Introducing children to those arrangements while parents are alive can make the eventual transition considerably easier.

Practical Problems

Perhaps a child does not want to act as an executor. Perhaps two siblings are unlikely to work well together as trustees. Perhaps a proposed attorney lives abroad. Perhaps one beneficiary's personal circumstances mean an outright inheritance would actually create problems rather than solve them.

These are much better discovered while everyone is available to discuss them. For all of those reasons, at iTrust121 we are very comfortable with children being involved in meetings where our clients want them there.

But there is another side to this.

When helpful involvement becomes unhelpful influence

We see another phenomenon surprisingly often. A parent has taken professional advice and spent considerable time considering how they want to protect their family. They discuss the proposals with their children, and suddenly the family has a new estate-planning expert. Usually armed with Google, ChatGPT and several hours of internet research

That can be where problems begin.

Your children may know you extremely well. That does not mean they understand estate planning.

Most people would not expect their son or daughter to advise them on complex tax, pensions, investments or corporate restructuring simply because they were going to inherit the result. Estate planning should be no different.

Wills, lifetime trusts, Will trusts, LPAs, inheritance tax planning, property ownership and trustee arrangements interact with one another. Looking at one element in isolation can therefore produce completely the wrong conclusion.

The danger is not that children are unintelligent.

It is that a little knowledge applied to a complicated family structure can create considerable confidence without equivalent experience.

"Just get a £99 Will"

This is perhaps the clearest example. A parent explains that they are considering comprehensive legacy planning. A child sees a cost attached to it and responds:

"Why do you need all that? Just get a simple Will online."

Superficially, that can sound sensible. It is cheaper. It appears simpler and everyone can congratulate themselves on having saved thousands of pounds.

But the comparison is more often completely meaningless. A simple Will may be perfectly appropriate for a simple estate where that is genuinely what the client requires. But it cannot sensibly be compared with a planning exercise designed to consider inheritance tax, bloodline protection, remarriage, divorce, bankruptcy, vulnerable beneficiaries, property protection, incapacity and the future control of inherited wealth.

Cheap and appropriate are not the same thing.

The objective should not be to buy the least expensive document. It should be to put the right planning in place.

Children can confuse

This is another difficulty we encounter, one family member reads about the seven-year inheritance tax rule, another has heard something about deprivation of assets, someone else has found an article about trusts. A fourth remembers something their accountant told them five years ago.

All of those individual points may have some relevance, but they may relate to completely different circumstances, be outdated or totally irrelevant. Before long, several separate legal and tax concepts have been combined into one conversation, and the parents who originally understood what they were trying to achieve become less certain than when they started.

Good advice should create clarity. Poorly informed commentary, however well intended, can do precisely the opposite. It becomes damaging and confusing and often leads to indecision at a critical time.

Then we come to the uncomfortable part: your children are not independent

This does not mean they are greedy, It does not mean they do not love you. It simply means that they have an interest in the outcome.

If your children or other beneficiaries expect eventually to inherit your estate, decisions about how that inheritance is structured affect them personally and therein lies the potential conflict.

Imagine two alternatives; Under the first, a child inherits £500,000 outright and the money arrives in their bank account.;Under the second, that £500,000 is protected through a trust structure designed to preserve the inheritance against foreseeable risks, IHT mitigation and potentially protect it for future generations.

From the parent's perspective, the second arrangement may represent protection and responsibility; from the child's perspective, it may look like a restriction to money.

That difference in perspective matters. Protection can feel like loss of control, this is perhaps the most important issue of all. Parents frequently want to protect an inheritance from circumstances their children cannot necessarily foresee.

That might include divorce, bankruptcy, financial vulnerability, poor decision-making, outside influence, remarriage, taxation or simply the desire to preserve family wealth for grandchildren.

A child looking at the same arrangement may ask a much simpler question: 

"But will I be able to get my money?"

That is entirely human. Most beneficiaries would naturally prefer an inheritance paid directly into their own bank account with no restrictions whatsoever. But what the beneficiary wants to receive is not necessarily the same as what the parent wants to leave.

A trust designed to protect an inheritance may introduce trustees, safeguards and controls precisely because the person creating the wealth does not want the inheritance exposed to every risk facing the beneficiary.

The beneficiary may therefore focus on what they believe they are losing, immediate unrestricted control, rather than what they are gaining: long-term protection.

Alternate Agenda's

Family dynamics make this even more complicated. One child may be financially secure, another may have debts. One may be married, another may be going through a separation.

One may want the family property retained, another may want it sold immediately, one may appreciate the protection offered by a trust, another may regard any restriction on their inheritance as completely unnecessary.

So when several beneficiaries become heavily involved in deciding the structure of an estate, whose interests are actually being represented?

The parents'? Or the beneficiaries'? Sometimes they are aligned. Often they most certainly are not.

There is nothing wrong with a child asking difficult questions. Advice and family opinion have different jobs, in fact, we encourage it. If a structure cannot withstand sensible questioning, it probably requires further explanation.

Children should understand what is being proposed, what the benefits are, what the limitations are and why their parents are dealing with it. But there is a substantial difference between:

"Can you explain why Mum and Dad need this?" and: "I don't think Mum and Dad should do this."

The first is involvement, the second may become influence and the person advising the parents needs to recognise the difference.

The iTrust view

At iTrust121, we are happy to have children and other family members involved in meetings where our clients want that. Often it improves the planning.

Questions can be answered openly, misunderstandings can be removed and the whole family can understand what the parents are trying to achieve.

But there is one question that should remain at the centre of the meeting:

Whose wishes are we protecting?

The answer must be the person whose estate it is. A quality adviser should consider the risks surrounding that client's legacy and explain the options available to address them.

The beneficiary inevitably has another consideration:  

"What does this mean for my inheritance?"

There is nothing improper about that question, but it is not the same question. Ultimately, your children may help you make better decisions, they may provide valuable insight, they may challenge assumptions and they may benefit enormously from understanding your plans while you are still here to explain them.

But they should not acquire a veto simply because they expect one day to inherit.

It is your wealth. It is your legacy and ultimately, it must remain your decision how much control, protection and security you place around it.

Your children should understand your estate plan, but they should not necessarily design it. 

James Berkeley
Senior Counsel
iTrust121 Ltd

Good estate planning does not exclude the family from the conversation. It makes sure everyone understands whose wishes the planning is ultimately there to protect.