Your dependents are people who materially rely on you for financial support and may include your children, aged parents, less privileged individuals and/or incapacitated adults (who you desire to cater for) who require resources for health, maintenance, support, education etc.
While some support is provided through guidance, other support requires money. Again, while it is expected that parents provide both, the key question here is what happens if the parents are not there to provide?
In solving the above, we believe three crucial steps are necessary.
Step 1: Leave enough money for them
Imagine raising someone else’s child if the parents left no money? Most current statistics indicate that raising a child to the age of 18 costs (on the average) more than N15million. Costs are higher in the earlier years due to health concerns, diapers and day care. On the back end, higher education could require additional money beyond age 18.
Assuming that only one parent is gone; can the remaining parent alone afford the costs of raising the children? What would the quality of life be for the surviving parent? We believe that it is a good idea if you accumulate enough to help cover child-care costs and future retirement earnings if that parent were to return to work when dependent children are older.
Step 2 – Name legal guardians for your children
If you fail to do this, then a court may be left to decide who will raise your children. If you have a valid Will that named guardians for your children, a court will almost always honour your request unless a valid reason is provided to the court to consider otherwise. The guardian you name will be responsible for issues such as the following:
Day-to-day care of the surviving children.
Making decisions about the children’s upbringing, education, health and welfare.
Usually a guardian will also be one of the Trustees for the property held in Trust for the child / children.
In addition to naming guardians, a last Will and testament can indicate distribution terms for your assets and appoint people to handle your Estate.
Step 3 – Create a Trust
Though we can regard a Will as just a piece of paper with distribution and guardian instructions, a Trust can be pictured as a box to hold assets for beneficiaries long after the Settlor had passed away and until the beneficiaries are mature enough to manage the assets.
Some statistics show beneficiaries, regardless of age, spend their inheritance within two years. With a Trust, beneficiaries can be forced to wait until predetermined ages before receiving their inheritance. If they need money prior to that age for reasonable health, education, maintenance or support needs, they may make a formal request to the Trustee who would decide on the appropriateness, based on how they think you would have responded.
Most professional Estate planners believe that even at age 25, some beneficiaries may still be too young to manage their finances themselves without any form of guidance because many children may still be in school at age 23. If a graduate knew that in two years, he or she would be receiving a decent sum of money, that child might not pursue and develop a career with the same intensity as a child not expecting to receive a sum of money in the near future.
For such children, it will be necessary to give the money in stages such as:
At age 30 – beneficiaries receive ¼ of their inheritance with no strings attached,
At age 35 – beneficiaries receive another ¼, and
At age 40 – beneficiaries receive the remainder.
Hopefully, if the first ¼ is spent recklessly, they will be wiser the second and third time around.
Trusts can also maintain a residence for children and their appointed guardians until the children have finished school. This is very appealing for:
Parents whose kids are well-established in their schools with their friends.
If potential guardians do not have a large enough home without having to buy a new home.
For beneficiaries with special needs who receive disability income, Trusts can hold distributions to those specific beneficiaries to avoid whatever disruptions that might arise.
Identifying Dependents
In identifying people who are your dependents, you should consider some of the following circumstances as a guide:
In the case of a child, he/she may be your biological child, your step child or your foster child.
In the case of other people, they may be any of your parents, blood siblings, adopted siblings, stepbrothers or stepsisters in your care.
Descendents of any of these also qualify, provided you materially support them.
In all these instances, the key factor is that a dependent should have relied on your financial support to survive. For example, if you support a person for a minimum of 6 months in any one year, such person may be seen as your dependent.
Conclusions
Begin by contacting a professional Trustee company. We advise that you conduct your own independent search to understand the basics of Trust and how it works. Arm yourself with questions for your Trustee.
Note that the signing of your Trust Deed (for Dependent Trust) is not the end of the whole issue. The process demands that you transfer assets into the Trust.
