Taking the time to create a comprehensive estate plan is important for every adult; however, once you become a parent it takes on a heightened importance. Naturally, as a parent, you want to make sure your child is well cared for in the event that something happens to you. You should consult with an experienced estate planning attorney to decide what specific components you need in your plan now that you are a parent. The Waukegan trust attorneys at Hedeker Law, Ltd, however, explain why a common addition for parents of young children is a trust.
Why Your Last Will and Testament Is No Longer Enough
For most people, a Last Will and Testament serves as their initial estate planning document and continues to provide the foundation for their estate plan as that plan grows. 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.
What Is a Trust?
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. A successor Trustee is also customarily appointed. A trust beneficiary can be an individual, an entity (such as a charity or religious organization), or even the family pet. A trust may also have numerous beneficiaries at the same time as well as having both current and future 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.
How Can a Trust Help?
A trust can provide a number of benefits to the parents of minor 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 and decide when they receive those distributions. 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. This further allows you to make certain your children continue to benefit from the assets held in the trust even if you are unable to manage those assets because of your incapacity.
Contact Waukegan Trust Attorneys
Please join us for a FREE upcoming seminar. If you have questions or concerns regarding the need to include a trust in your estate plan as the parent of young children, contact the experienced Waukegan trust attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.