For the average person, becoming a parent is a life-changing event. Everything is viewed in a different light once you are a parent. Your estate planning goals and objectives are no exception to that general rule. In fact, estate planning takes on a heightened importance when you are the parent of a minor child. Although the urgency that you feel regarding the need to have an estate plan in place may give way to a less urgent desire to keep your estate planning current once your children reach the age of majority, the common thread for all parents is the need to protect their children’s inheritance. The asset protection attorneys at Hedeker Law, Ltd. explain how to protect your children’s inheritance from infancy through middle age and beyond.
Obstacles to Overcome for Parents with Minor Children
When a child is a minor is when it is most important that a parent has a plan in place to financially support and provide for the child in the event something happens to the parent(s). Understandably, the idea of something happening to you when your child is very young may be something you prefer not to think about; however, the reality is that a tragic accident or life-threatening illness could take you away from your child. That reality makes estate planning even more important if you are the parent of a minor child. You will, however, encounter obstacles, the first of which is the fact that your minor child cannot legally inherit from your estate. That means that you must plan accordingly in your estate plan. Most parents choose to create a trust to hold their child’s inheritance. A trust offers numerous additional advantages beyond acting as a holding tank for your child’s inheritance. It also lets you appoint the person of your choice to manage and invest your child’s inheritance until your child is old enough to take over himself/herself. Moreover, the trust terms can be used to stagger your child’s inheritance after your child reaches adulthood. Handing a large sum of money to a child who has just legally reached adulthood is rarely a wise idea, no matter how mature the child may be. Instead, disbursing the trust assets at different benchmarks, (such as age 18, 21, 25, and 30) allow the child time to learn how to manage the inheritance.
Protecting Assets for Adult Children
After your children become adults, the objective changes somewhat. Instead of worrying about providing for young children in the event something happens to you while you are young, you need to start worrying about protecting your assets so there will be something to leave behind when you are gone. To do that, you have to make it through your retirement years first. For many people, that also entails the expense of long-term care(LTC). If you fail to plan for the high cost of LTC, you could lose a significant portion of your retirement nest egg covering those expenses. Planning for the cost of LTC typically means incorporating Medicaid planning into your overall estate plan long before you reach retirement age. Medicaid planning is often necessary because Medicaid may be your only option for help covering the cost of LTC; however, to qualify for Medicaid your income and assets must be below the program limits. Furthermore, transferring valuable assets out of your estate in anticipation of the need to qualify for Medicaid is no longer an option because of Medicaid’s five-year look-back rule. Creating an irrevocable Medicaid trust may be your best option if you wish to protect valuable assets while still setting yourself up for Medicaid eligibility. You may also wish to use a trust to protect assets from other potential threats such as creditors, business failure, divorce, or even spendthrift beneficiaries. Talk to your estate planning attorney about how best to protect your children’s inheritance.
Contact Illinois Asset Protection Attorneys
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns regarding how best to protect your children’s inheritance, contact the experienced asset planning attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.