Estate planning with a continuing trust can be an important back-to-school step for parents of minor children.
Have you noticed the sudden increase in early morning (and mid-afternoon) traffic around your neighborhood?
We have.
Our office/home is adjacent to the conjoined Blue River Elementary and Blue Valley Middle Schools, and the streets surrounding these schools are lined with motor vehicles filled with parents delivering (and later retrieving) their precious progeny.
And the start of a new school year always comes with a long checklist.
Parents are busy buying school supplies, purchasing food for lunches, arranging carpools, and planning weekly schedules.
According to a recent Kiplinger article titled “To Protect Your Kids, Consider These Estate Planning Steps,” the hectic pace of life can make it challenging for parents to prioritize foundational protections for their children.
While estate planning may not seem urgent, it is imperative for parents of minor children to establish a comprehensive estate plan.
A continuing trust could be as beneficial to your child this back-to-school season as new school supplies.
Many parents desire good things for the future of their children.
They envision their children living with solid values, receiving a good education, and having successful and meaningful careers.
Although these are worthy goals, they are pretty vulnerable.
Would your children be able to have the life you want to provide if something were to happen to you?
Would they have people to love, support, and guide them?
Would they have their financial and physical needs met?
Estate planning allows parents to answer “yes” to these questions confidently.
While married couples can leave their children orphaned, it is a greater risk for parents who are single or unmarried.
These individuals will need to choose guardians to rear their children to adulthood.
Because minors cannot inherit directly, trusts can be beneficial in providing for their needs.
The goals you have for your children will shape your estate planning.
If you want your child to learn a trade, your plan will be different from if you want your child to attend college.
Giving back through volunteering and having an entrepreneurial spirit must be encouraged through sharing values.
Estate plans can help you protect the future of your minor children.
You can document your values and promote your wishes by deciding how to distribute money to your heirs.
If you want to pay for trade school or college, you can arrange for these to be partially or fully funded.
It is possible to incentivize certain milestones and actions through financial rewards.
For example, you can provide distributions for holding a job, engaging in charitable activities, or experiencing other cultures through travel.
Using trusts in your estate planning, you can provide inheritances in installments rather than a lump sum.
Few 18-year-olds are capable of responsibly managing a financial windfall.
Often, these lump sums can be inherited when parents list minor children as beneficiaries for retirement plans or life insurance policies.
These young heirs often squander their inherited wealth.
Trusts allow you to structure how your assets are inherited to promote responsibility.
A continuing trust manages and holds money for minor children until they achieve specific goals or reach certain ages.
With this structure, you can prevent your “newly minted” adult from making poor financial decisions.
Your child can learn financial responsibility while growing and maturing by receiving smaller distributions over time.
When you create a continuing trust, you can schedule distribution amounts and ages so that your heirs receive their inheritance in portions.
Because your children will not have you around to provide financial advice and wisdom, you can structure it into your trust.
As a result, you can protect the money for the future and teach responsibility.
Few minors who turn 18 can handle their laundry, much less a large sum of money.
Continuing trusts provide safeguards against poor financial or lifestyle decisions leading to lawsuits or addiction.
This trust can protect the health and finances of your child.
Continuing trusts are not DIY estate planning tools.
An experienced estate planning attorney must carefully draft them.
Your trust will need to account for management of the trust, trustee fees, and income taxes.
Selecting a trustee who can manage a trust and wants what is best for your children will be essential.
Another helpful type of trust is a Health and Education Exclusion Trust (HEET).
This type of trust specifically covers healthcare and education.
Incentive trusts can help motivate your children to achieve outcomes in school or work.
A beneficiary-controlled trust will give your child partial control over the inheritance you leave and protections against creditors and other risks.
Comprehensive estate planning may feel overwhelming, but protecting and providing for your minor children is the best way.
If you have not yet created a comprehensive estate plan to support your loved ones if you were to die or become incapacitated, schedule an initial consultation.
Estate planning is an essential element of providing security for your children.
Those with minor children will find trusts tailored to their specific goals and needs to be a good option for protecting their family.
With a controlled inheritance, you can protect the assets from being squandered and motivate desirable values and actions.
Because comprehensive estate planning is multifaceted, you should work with an experienced estate planning attorney in your state of residence.
This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.
Reference: Kiplinger (Nov 18, 2023) “To Protect Your Kids, Consider These Estate Planning Steps”
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