Many people are quick to tell parents that they need to establish estate plans. After all, their children are fully dependent on them. Should a parent die or become incapacitated, their children may be left without basic, necessary support.
New parents who draft wills are ahead of the curve. Quite a few people procrastinate about even doing that much. A will allows the testator to name a guardian for their children and to create basic beneficiary designations. However, while children are still minors, a will might not be enough to actually ensure that they inherit from the estate. Parents may need to expand their estate plans to better provide for their children.
Children don’t control their inheritances
The complication many parents fail to address is the legally dependent status of their minor children. Surviving children who lose a parent can potentially inherit most or all of the property from the parents’ estate. However, they may not actually have direct control over that inheritance until they turn 18.
One of the many forms of legal responsibility that parents have is the obligation to manage the financial resources and responsibilities of their children. The surviving parent or guardian of the children may have control over their inheritance. In some cases, the person with the authority to access and use inherited property may squander what a parent has set aside for their children.
Parents may want to create trusts as a way of preserving an inheritance for their children. Trusts can have many restrictions regarding the distribution of property. A testator might be able to preserve assets for when their minor children turn 18. They can even limit what they use those assets for after reaching adulthood.
Choosing someone other than the guardian of the children to serve as trustee can help ensure that at least a portion of their inheritance remains intact when they reach adulthood. They can then use the resources provided by a parent to pay for college expenses, start a small business or cover a down payment on a home. Parents who recognize that an inheritance may be vulnerable when beneficiaries are still minors can make move to ensure that their legacy has a positive impact on their children.
Establishing an effective estate plan as a parent requires careful consideration of the children’s current and future needs. Using a trust, in addition to a will, can help ensure that children have the support of a guardian and an inheritance available to them once they become legal adults.