Chaotic situations, like the one the country is going through with the coronavirus pandemic, have a tendency to sharpen everyone’s focus on the things that truly matter to us. An uncomfortable truth COVID-19 has underscored is that tomorrow isn’t guaranteed. For those of us with minor children, we know how vital it is to make an estate plan that not only takes care of our assets when we’re gone but, also, makes sure our children’s inheritances are safe and secure until they reach the age of maturity.
Basics of a Trust
An estate planning tool our firm often recommends for individuals with minor children is a revocable living trust. Before we dive into the benefits of using a revocable living trust, let’s go over the basics of a trust. There are three main parties involved with a trust:
- The trustor (sometimes called the settlor) is the individual who is creating the trust and will, eventually, place his or her assets in the trust to fund it.
- The trustee is someone who is charged with managing the assets in a trust and distributing those assets to the beneficiary according to the trust’s instructions. With a living trust, the trustor also acts as the trustee as long as he or she has capacity. This means that although the trust is technically the owner of its assets, the trustor/original trustee can exert control over the trust’s contents.
- The beneficiary or beneficiaries are those who will ultimately receive the assets contained within a trust.
Why Would You Create a Trust for Your Minor Children?
Many people ask what the benefit is of creating a trust to pass assets to their beneficiaries (in this context, minor children) instead of using the tried-and-true Last Will and Testament. One of the main reasons is that, once minor children legally become adults, an inheritance from a Will is given to them in one lump sum. Although people, in the eyes of the law, become adults when they reach age 18, many 18-year-olds would not prove to be responsible with a sudden windfall of money.
In your trust, you can stipulate that your children are only to receive certain assets when they reach certain ages or complete milestones. Or, you can designate a portion of the trust to be used for specific purposes, like weddings or college. There are countless ways you can customize a living trust and its terms to benefit both you and your beneficiaries, providing you peace of mind.
Conclusion
Creating an estate plan is much more than just setting up a Will and divvying up your property and assets. There are many ways you can go about providing a secure financial future for your minor children, but setting up a revocable living trust is an especially effective way to do so.
If you are not 100 percent certain how your children would receive your finances and assets if you were to pass away tomorrow, it is time to meet with a quality estate planning attorney to set up a plan that works for everyone. Norton Pelt would be honored to get you started on a plan for your family today; we are currently offering free consultations to all first responders, nurses, and other medical staff. We look forward to speaking with you!
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