Few people spend much time thinking about their own mortality; but on occasion, it’s essential to consider that inevitable event. If you have children of your own or young relatives with whom you are close, planning and thinking ahead is even more important.
One way to leave money or possessions to your children is to do so in your will. Of course, your will should also specify guardians for your minor children. This guardian can also be in charge of handling the assets and property for the kids until they come of age.
Using your will to designate minor beneficiaries is fairly easy. However, it has a few drawbacks. Upon your death, the money and other resources will essentially be at the disposal of the minor’s guardian. Even if that person is someone whom you love and trust, they may not spend or use the money in the way that you would prefer. Further, when the kids reach the age of 18, the remaining assets will be distributed to them, even if they do not have the judgment to responsibly handle money.
Another way to leave money or possessions to minor beneficiaries is to create a trust for each child. Along with the creation of the trust, you appoint a trustee, an individual who manages the money. Also, with a trust you can specify how and when the money/assets can be used. A trust gives you much more control over the guidelines, conditions, and circumstances of the assets’ use.
You can leave instructions with the trust regarding what to do when minor beneficiaries comes of age. Perhaps the child can become a co-trustee and help with the management of the assets or perhaps you can allow the distribution of the entire balance of the trust or a portion of the trust to pass to the beneficiary once that person achieves a certain age or completes other specific requirements.
Are you looking for ways to cut down on the taxes that your children have to pay on your estate? Talk to your lawyer and your financial advisor about the possibility of putting some money into a 529 plan or arranging your assets to fit within the requirements of the Uniform Gifts to Minors Act or the Uniform Transfers to Minor Act. These plans and provisions may allow your beneficiaries to sidestep some of the hefty taxes that could be levied against your estate.
Other Kinds of Trusts
If you like the idea of controlling certain aspects of your hard-earned assets even after your death, you may be interested in other kinds of trusts. A charitable trust takes effect while you are living, supporting specific charities, and then moves any remaining assets to named beneficiaries upon your decease. A credit shelter trust takes full advantage of the federal estate tax exclusion amount. Ask your estate planning attorney to explain these options, their benefits, and how they might improve the overall effectiveness of your estate plan.
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About Nicole K. White
After losing a close relative, Nicole witnessed the devastation, enormous expense and chaos caused by not having a simple estate plan. It is Nicole’s mission to educate parents, especially single parents, about protecting themselves, their families, minor children, and assets with comprehensive Estate Planning.