Becoming a parent is a strong incentive to establish an estate plan. Parents want to know that the right people care for their children and that they receive economic support after their passing. Some parents with good intentions make mistakes while estate planning.
They want to name their children as their main or only beneficiaries. They may name a guardian for their children and then allocate most or all of their resources to their children in their wills. While that may seem like a smart decision, the children may not ultimately inherit as much as the parent intends. In fact, they might not receive an inheritance at all.
Minor children typically cannot gain direct control over significant inherited assets. Instead, their surviving parent or guardian controls those resources until they reach adulthood. Parents with minor children may need to plan carefully to preserve resources for those children in the future.
Many parents choose to fund trusts
A will is a critical estate planning tool. Those who draft wills can choose their personal representatives to oversee probate proceedings. They can also nominate a guardian to take care of their children. Additionally, they can provide clear information about their beneficiaries and what those beneficiaries should inherit.
If the primary beneficiaries of the estate are underage children, then the best solution might involve creating a trust rather than relying on just a will. A trust is under the control of a trustee, who should be separate from the guardian or surviving parent of the children.
The parent funding the trust can place numerous restrictions on distributions made from the trust. That way, they can ensure that the resources only go to maintain a baseline standard of living for their children and to cover appropriate and necessary expenses.
Trusts can help preserve inherited resources until child beneficiaries become legal adults. The children can then use what they inherit to establish an independent household, pay for college or purchase basic necessities.
Recognizing that a trust might be beneficial for the protection of minor children can help parents establish thorough and effective estate plans. Parents who fund trusts can provide support for their children that may last for years in the event that a tragedy occurs.
