If you are the parent of young children, you already know that your role as a parent is both the most rewarding, and most terrifying, role you will likely ever undertake. The moment you became a parent your priorities undoubtedly changed. The desire to protect and provide for your children guides all your decisions, including those you make within your estate plan. A Waukegan estate planning attorney at Hedeker Law, Ltd. explains how estate planning changes hen you are the parent of young children.
Is a Last Will and Testament Enough?
Your Last Will and Testament probably serves as the foundation of your estate plan. While your Will can accomplish the distribution of your entire estate, you will find that it is no longer enough once you become a parent. The reason for this is that your minor children cannot inherit directly from your estate. Therefore, assets gifted to a minor in a Will must be managed by an adult until the child reaches the age of majority. The problem, however, is that you lose the ability to decide who that adult is if you rely on your Will to pass down assets to your minor children. This is the primary reason why parents of minor children choose to establish a trust in addition to their Will.
While you may decide that a Will is not the ideal tool for guarding the inheritance you plan to leave for your children, your Will remains a crucial estate planning tool for parents with young children. The only opportunity you will have to officially nominate a Guardian for your children is in your Will. 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. For this reason alone your Will remains an important component of your estate plan.
What Is a Trust and Why Do I Need One?
At its most basic, a trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, also referred to as a Grantor or Maker, who transfers property to a Trustee. The Trustee, who is appointed by the Settlor, holds that property for the trust’s beneficiaries. All trusts fit into one of two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust, activates during the Settlor’s lifetime.
A trust offers a number of important benefits to the parents of young children. To begin with, 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 if you create the right type of trust. 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. Moreover, you have the ability to use the terms of the trust (which you create) to ensure that your children continue to benefit from the assets held by the trust during your incapacity should that come to pass.
Contact a Waukegan Estate Planning Attorney
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns regarding estate planning for parents with young children, contact an experienced Waukegan estate planning attorney at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.