Having at least a basic estate plan in place is beneficial to every adult. If you are the parent of a minor child, however, your need for a comprehensive estate plan increases dramatically. A Sacramento estate planning attorney at the Northern California Center for Estate Planning & Elder Law explains the best way to protect your minor child in your estate plan.
Having a Child Changes Your Goals and Priorities
Before you became a parent, your primary estate planning goals likely focused on the distribution of your assets in the event of your death. Becoming a parent, however, tends to change your priorities and goals. Now your primary goal is to protect and provide for your child. As a result, you will need to make changes to your estate plan.
Your Last Will and Testament May No Longer Be Enough
For most people, a Last Will and Testament serves as the foundation of their estate plan. Sometimes, it serves as the entire plan given that it can distribute your entire estate. As the parent of a minor child though, you will find that a Will is no longer enough. One reason for this is that your minor children cannot legally inherit directly from your estate. Because of this, assets gifted to a minor in a Will must be managed by an adult until the child reaches the age of majority. Consequently, if you continue to depend on your Will to distribute your child’s inheritance you lose the ability to decide who the adult will be that guards your child’s inheritance. For many parents, the solution is to create a trust to protect their child’s inheritance.
Nominating a Guardian
Your Will continues to play an important role in protecting your minor child though because it provides you with the only official opportunity you will have to nominate a Guardian for your child. A Guardian is the person you would want to take care of your children in the event something happened to you and a court was forced to appoint someone. While a judge will make the ultimate decision, most will abide by your wishes as reflected by your nomination of a Guardian in your Will.
How a Trust Can Protect Your Child
A trust helps to protect your child in several ways. As the Settlor of the trust, you appoint the Trustee, and any successor Trustees, allowing you to decide who will protect and manage the inheritance you leave your children. In addition, a trust lets you stagger the inheritance you leave your children instead of giving them a lump sum. You can also decide when they receive those distributions and how much will be distributed each time. No matter how mature a child may be, handing an 18 year old a large lump sum inheritance is rarely a wise idea. Instead, you may wish to direct the trust to distribute that inheritance in increasingly valuable disbursements over the course of several years to allow your child an opportunity to learn to handle his/her finances. Finally, unlike a Will, a trust can also help you plan for the possibility of your own incapacity. Whereas the terms of a Will only apply upon the death of the Testator, a trust can cover incapacity as well. This allows you to make certain that someone of your choosing takes over control of your assets in the event of your incapacity instead of leaving it up to a judge.
Please download our FREE estate planning checklist. If you have additional questions or concerns about the best way to protect your minor child in your estate plan, contact us at the Northern California Center for Estate Planning & Elder Law by calling (916)-437-3500 or by filling out our online contact form.