By Linda T. Cammuso
“If you have set up a living trust to hold your young children’s inheritance (which should always be the case when you have minor children), there will be a separate role for the financial oversight of your children’s money,” see Considerations in Choosing Guardians for Minor Children.
If you are among those who have not yet considered establishing a living trust to protect your child’s inheritance because you believe that a simple will provides protection for your children after you pass, or because you think that trusts are only for wealthy individuals, we urge you to understand the difference.
A simple will makes basic designations for your surviving children: who will care for them while they are still minors, and the share of your estate they will receive. However, a will must go through probate, which can be a lengthy process. Additionally, your will becomes a public document and even though you have chosen a Personal Representative and Guardian for your children, he/she must be approved by the Probate Court – and their appointment may be challenged. You should also be aware that tax planning benefits are limited under a will. Perhaps the worst outcome of a will-only estate plan is that children walk away with and fully control their inheritance when they turn 18 – a situation that is rarely in the best interest of a young adult.
A revocable living trust can protect your family in many ways. More flexible as a tool to protect your children, a trust puts you in control of your children’s future regarding their personal and financial care. Unlike a will, the revocable trust is effective both during your lifetime and after your death. Other benefits include:
- Probate avoidance
- Flexible tax planning
- The trust documents are not part of public record, and therefore remain private
- Trusts are more difficult to contest than a will
- Your appointed Trustee does not require approval and his/her appointment is exceedingly difficult to challenge
- The assets within the trust can be protected from a child’s creditors or divorces
- The trust can ensure that assets will be held until you (or your Trustee) deem that your child may be mature enough to handle the funds
- For special needs children, a properly-designed trust will preserve the child’s eligibility for government benefits.
In today’s world, a will-only estate plan is likely to leave your family exposed to unnecessary complications later. Taking the time to learn about living trusts – regardless of whether you set one up – will at least give you the peace of mind that you’ve made educated decisions for your family’s future.