Have minor children? Consider a trust.
Written by: Allie Schmidt, Financial Advisor, CFP®, CPA
We just had our second child, a little girl, Charley Lynn. She’s a sweet little baby and seems to be sliding right into her role as a sidekick to her big sister, Wesley. As we adjusted our estate documents to include our second little one, it reminded me of how important it is to consider establishing a trust if you have young children.
Here are 3 reasons it’s worth considering:
1.) It can take a long time for the assets to become available. If you die and leave money to minor beneficiaries, the court will have to appoint a Conservator to receive the inheritance for your children. That Conservator will be required to report annually to the court, and the court will also appoint an overseer. All of this can be a long costly process delaying the availability of funds.
2.) The assets are theirs at age 18 or 21. Right now, both Wesley and Charley are about the best little people around, but the thought of them inheriting a large sum of money right when they turn 18 causes me to lose sleep. If there is no trust and your kids are named beneficiaries of your accounts and life insurance, those kids are going to be entitled to receive all of those assets immediately when they turn 18 or 21 depending on the state you live in. A trust would allow you to put in place limits to what they can withdraw the money for, particularly when they are under the age of 25.
3.) Separate guardian and trustee: For a lot of parents, the guardian or person who is best suited to raise your kids if something were to happen to you isn’t necessarily the best person to manage the assets. In a trust, you’re able to enlist someone as trustee that can manage the investments and assets for the benefit of the children to ensure the assets provide for their current and future needs. You can even name a corporate trustee as a co-trustee to help distribute the assets, which can avoid a close family member having to deny funds for one reason or another.
These are just a handful of reasons why it might make sense to consider a trust if you have young children. You’ve worked hard to plan for and provide financial stability for your kids whether you’re here or not, it’s important to make sure the final step is taken care of correctly to ensure these funds can help your kids today and into the future.
It is important to work with an estate attorney to assess your specific situation.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through HD Wealth Strategies, a registered investment advisor and separate entity from LPL Financial. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you discuss your specific legal issues with a qualified legal advisor. This is a hypothetical example and is not representative of any specific situation. Your results will vary.
