Most parents want to make sure their children are provided for in the event something happens to them while the children are still minors. Grandparents, aunts, uncles, and good friends sometimes want to leave gifts to beloved young children too. Unfortunately, good intentions and poor planning often have unintended results. Don’t make these common, expensive mistakes. Instead, here’s how to both protect and provide for the children you love.
Common Mistake: Don’t Use a Simple Will to Leave Assets to Minor Children
Many parents think if they name a guardian for their minor children in their wills and something happens to them, the named person will automatically be able to use the inheritance to take care of the children. But that’s not what happens:
Most parents would prefer that their children inherit at a later age, but with a simple will, you have no choice; once the child reaches the age of majority, the court must distribute the entire inheritance in one lump sum.
Common Mistake: Avoid Court Guardianship
A court guardianship for a minor child is very similar to one for an incompetent adult.
All of these expenses are paid from the inheritance, and because the court must do its best to treat everyone equally under the law, it is difficult to make exceptions for each child’s unique needs.
Correct Action: To Protect the Child and the Assets, Use a Trust
Instead of using a simple will, a better option is to set up a children’s trust in a will:
The best option is a revocable living trust, the preferred option for many parents and grandparents:
For many folks, the absolute best solution is to keep the assets in trust for their lifetime or until assets get spent down. Assets that are trust protected are there for your child, but can’t be taken from them. Your children will grow up and need the continued protections you can provide in a revocable living trust.