While estate planning is not something that most people look forward to, taking the time to create an estate plan is critical. It ensures that your family is taken care of when you pass and that your assets are distributed in accordance with your wishes. However, it is particularly important that you create an estate plan if you have underage children. If you were to die unexpectedly, having an estate plan in place will help to ensure that your children are taken care of.
While both wills and living trusts are beneficial estate planning tools that can help to ensure that your estate is divided in accordance with your wishes, a living trust provides additional protections for underage children, making them the best option for young families. If you are looking to start the estate planning process and you are unsure whether a living trust is right for you, here is a look at just a few of the ways in which a living trust can help to protect your underage children in the event that you die unexpectedly.
Avoid Probate Court
Perhaps the greatest protection a living trust provides to underage children is that it helps to shield much of your estate from the probate process. After a person dies, their assets become a part of their estate, and their estate must go through probate court in order for their estate to be distributed to their heirs. Even if the deceased had a will, the estate will still have to go through probate in order for the will to be authenticated, and this will also allow a judge to oversee the process of distributing the deceased's assets in accordance with their will.
If you pass while your children are still underage, the probate process can make an already difficult time even more complicated. Even with a will, the probate process can be costly and take months to complete, and during this time your children will not have access to their inheritance. However, your children and their guardian will need access to these funds in order to ensure that they are cared for properly, which is where a living trust can be particularly beneficial. Unlike with a will, assets placed in a trust before your death do not have to go through probate. This means that as soon as you die, your designated trustee can immediately access the assets in your trust to ensure that your children are taken care of properly.
Ensure Your Assets Go to Your Children
A living trust can also help to protect your children in the event that you predecease your spouse and they remarry. By creating a trust, you can stipulate exactly who has access to your assets and benefit from your estate. In this way, you can ensure that your spouse is taken care of during their lifetime, but you can also stipulate that when your spouse dies that your remaining assets go to your children and not the new spouse. This ensures that your children are protected no matter what happens after you are gone. This can also be beneficial for single parents who plan to marry in the near future and want to make sure that their children are cared for after their death.
Reduce Estate Taxes
The fact is that you will have worked for a lifetime to earn the assets that you have in your estate, and it is understandable that you will want as much of your hard-earned money to go to your children as possible. However, depending on the laws in your state, and the value of your estate, your estate may be subjected to heavy taxation after you die, reducing your children's inheritance. Depending on the type of trust you choose, a living trust may be able to shield your estate from taxation. In fact, reduced estate taxes is one of the most popular benefits of choosing a living trust, and it can be helpful in ensuring that your underage children have as much financial support as possible after you are gone. However, it is important that you talk to an estate planning attorney to ensure that you take the proper steps to reduce your estate's tax burden.
Adapt to Changing Circumstances
If you have minor children, you may decide that a revocable trust is the best option for your family. As the name implies, a revocable trust can be revoked, which can allow you to make changes to the trust during your lifetime. For families with underage children, a revocable trust can be useful as it can allow you to make changes to your trust and adapt to changing circumstances as your children age. The fact is that what made sense for your family when your children were first born may no longer make sense when they are in high school, and a revocable trust can give you the flexibility to make changes to your estate plan during your lifetime. This ensures that your children are sufficiently taken care of should your family's needs change over time.
Ensure That Your Children Are Taken Care Of Should You Become Incapacitated
A living trust can be instrumental in ensuring that your children are taken care of should you become ill or incapacitated and are no longer able to take care of your financial affairs. You can use a trust to outline how you want your assets to be managed and your children to be financially cared for in this circumstance. Under the instructions you would have outlined in your living trust, control of your estate could be transferred to your designated trustee as soon as you are deemed incapacitated, allowing for your children to be taken care of financially without the need for the involvement of a judge. Your trustee can begin providing financial support to your minor children almost immediately. Otherwise, a court process would be required to certify your incapacity, and a conservator would be named to act on your behalf.
Designate a Trustee to Care for Your Children's Finances
A living trust also provides you with the opportunity to name a trustee to manage the assets in your trust who will ensure that your children are cared for financially. Even if you have someone in mind who you feel would be a good guardian for your children, it is not always a good idea to have your children's guardian act as trustee as well. With a living trust, you can designate a separate trustee who will ensure that your children's inheritance is being used responsibly, and you can stipulate how much access your children's guardian has to their assets. This will ensure that your children's finances are protected until they come of age.
Provide Guidance for Older Children
Many parents of underage children also prefer to choose a living trust as this allows them to stipulate when and how their children have access to their inheritance. While minors cannot inherit property or assets until they are 18, many parents may see this as still being too young of an age for their children to manage large sums of money. Without a trust, any money that is left in the estate would become available to your children as a lump sum when they turn 18. If they are not responsible enough, they may blow through this money quickly. With a trust, however, you can stipulate that your children do not have access to their inheritance until a later date, Then, ensure that their care and education is paid for in the interim. You can even specify that your children only have access to specific amounts annually, or that they can only use their inheritance for specific purposes such as education or to buy a house. A living trust gives you complete control over how your finances are disbursed once you are gone, protecting your children from spending their inheritance irresponsibly.
What Other Estate Planning Steps Should I Take to Protect My Children?
Of course, you may also wonder if a living trust will fully protect your underage children, or if there are other estate planning steps that you should consider taking. One of the main things that a living trust cannot do is designate a guardian for minor children. When estate planning, you will need to create a designation of guardianship for minor children in order to ensure that you have someone to look after your children when you are gone. You may want to consider including guardianship designation in a pour-over will. Having a will in addition to a trust can be important, as adding a pour-over will allows you to make plans for assets that are not including in your living trust, ensuring that your estate is handled according to your wishes once you are gone.
Learn More About How a Living Trust Protects Underage Children
Estate planning is often a difficult process that can be made even more complicated if you have underage children who will need to be cared for and protected in the event that you die unexpectedly. This makes it critical that you work with an experienced estate planning attorney during this process who can walk you through your estate planning options and help to ensure that your children are taken care of after you are gone. Contact us to learn more about the steps that you can take when estate planning to protect your underage children.
For more information please request a copy of our Legal Services Schedule (PDF format).
