Being a father of minor children, I often am so busy running, chasing or sneaking to take a nap that I often find it difficult to do much else, including eat, sleep and work. But as a parent, I have to consider what will happen to my assets and my children if something were to happen to my wife and me. Such a question is often not so easy to resolve and many of the options which come to your mind instantly may not be the best options.
Often times I hear parents say that they have changed all of their beneficiary designations for their insurance policies and financial accounts to name their minor children as contingent beneficiaries. The downside of designating minors as beneficiaries, is that minors cannot legally own or manage property, only an adult person with legal capacity can.
In response to being told that minors cannot own property, I may be told, well can I just designate my relative or a close personal friend as the beneficiary of my assets, and they can manage and distribute the assets as they see fit to my children. The concern with that scenario, is that the relative or the close personal friend will be treated for legal and tax purposes as the owner of the account, and any assets distributed by this person to your children may be treated as a gift. Moreover, if this person begins to treat some or all of these assets as theirs then a legal battle would likely ensue with unpredictable results.
To alleviate such issues arising, parents of minor children should consider implementing trusts for their children into their estate plans. By implementing children trusts into their estate plans, a parent would be creating a legally defined and enforceable relationship between a “trustee”, the person who manages the trust assets, and the “beneficiaries”, who are your children that are entitled to distributions under the trust from the trustee.
The terms of the trust for your children can be customized. That is, you can define for what purposes a trustee can make distributions to your children. You can even decide to implement a trust which terminates automatically at a certain age, which you can pick. Or as an alternative, you can create a trust which continues for the lifetime of a child. A lifetime trust can be very beneficial for a child even when he or she reaches adulthood because a lifetime trust generally provides asset protection from a child’s personal creditors, judgments or a later divorce. You would even have the ability to designate when your children could serve as his or her own trustee to manage and control their trust and determine when to make distributions.
I am here to assist you with providing you with options to consider for your estate plan and guidance in choosing the estate plan that best fits your family, including Trusts for your children. Please contact me to schedule an appointment to discuss further.