I’ve often said, while people plan their estates to avoid probate and save taxes, at its core, estate planning is about making things easier on the ones they leave behind. This sentiment is especially true for families with minor children.
While typically guidelines in estate planning are more discretionary than hard and fast, one such rule in planning for families with minor children is the need for a trust.
Why this rule? Because children are legally incapable of inheriting assets outright. Without a trust, any inheritance left to the children will be held by a custodian under the supervision of the court. The custodian will be required to file a bond with the court, will act under the court’s supervision, and as such the custodian will be required to file an annual accounting with the court. The court, bond and legal fees for these proceedings would be paid out of the children’s inheritance.
One more reason a custodianship is not preferred? When the children turn 18, any money left over is given to them outright. If we’ve done proper planning, and we’ve purchased adequate life insurance to assist in “finishing the job” of raising the children, this could be a sizable sum for someone 18 years old to have unfettered access to.
However, if we develop an estate plan that leaves money in trust should something happen to the parent(s) before the rearing of the children is complete, there’s no need for court supervision, or a bond, or attorney’s fees in navigating the court. The money can be used for its intended purpose – providing for the children. We can set up the trust so that the children do not inherit the money outright at age 18. In fact, we could go as far as giving the children access to their money, but leaving the money protected from potential creditors, ex-spouses and even the state (for beneficiaries on public assistance).
We’ve assisted families that were victims to the simultaneous deaths of the parents of small children. While it’s true the likelihood of a catastrophe of this nature occurring is slim the ramifications for lack of planning are far reaching. Why subject your family to such risk when there is a rather simple solution though estate planning.
If you’d like to learn more or to speak with an estate planning attorney about your situation, contact Brady | Cobin Law Group, PLLC our Raleigh Estate Planning Attorney for an initial consultation – (919) 825-1518.