Planning for Children & Young Adults

 

One of the greatest challenges for parents when creating an estate plan is deciding when and how their children will receive their inheritance.   This Children's Planning Guide is designed to introduce parents and grandparents to some of the planning opportunities available for distributing assets to their children and grandchildren.

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Many parents  leave more instructions for the babysitter when going out for just a few hours than they leave for the management and distribution of their entire estate on death.  Families with young children should be certain that assets set aside for their children's education and care will be wisely invested and properly distributed by someone who shares their beliefs.

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Families with teenagers or young adult children often worry about peer pressure, problematic relationships and failed marriages.  They fear that their children's inheritance will rapidly be depleted or squandered.  All of these issues and many more can easily be addressed with experienced, professional guidance in the planning process.  

Regardless of the age of your children, planning for them is one of the most important reasons to have an good estate plan.  Through proper planning, you can assure that the persons you choose will have all of the direction and authority necessary to provide care and financial support for your children in your absence.

  

Below are some questions frequently asked by parents in the planning process and some possible solutions to consider in designing your own estate plan.

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When and how do you want your children to receive their inheritance? 

1.  Outright in one lump sum? 

2. Staggered distributions at specified ages?

3. Only as they need it, and no more than they need?

 

Lump Sum Distribution.      Here is how a lump sum distribution typically is structured.

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I want each of my children to receive all of the principal and accumulated income of his/her share of my estate when each child attains the age of ______.   If a child of mine is under the age specified, I want his/her share to be held in a separate trust and managed until the specified age is attained.  

 

Factors to Consider:

  

Minimum age should be at least 18 to avoid a conservatorship (probate court dictates how the money is spent);

 

Have your children demonstrated financial maturity?

 

How will receiving a large inheritance at a young age affect their lives? Will they finish college or other job training? Are they easily influenced by peers or members of the opposite sex?

 

Is one or more of your children in a troubled or unstable relationship? If so, you may wish to consider keeping assets in trust for the child's benefit.

 

  Staggered Distributions.     Here is how a staggered distribution typically is structured.

 

  I want my children to receive partial, lump sum distributions as follows:  _____% when each child attains    the age of ______,  then _____% at age _____,  then balance at age ______.

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  Factors to Consider:

  

  Minimum age should be 18 to avoid guardianship (probate court dictates how the money is spent);

 

  When do you want your children to have an opportunity to manage a portion of their inheritance              themselves and how much are you willing to give them initially?

 

  What time intervals should there be between each distribution? Two years? Five years? Ten years?

 

  How will receiving a large inheritance at the specified ages affect their lives? Will they finish college or    other job training? Are they easily influenced by peers or members of the opposite sex? 

 

Lifetime Trust (Dynasty Trust).

 

I want my children's inheritance to be held in trust for their lifetimes with instructions to my Trustee to provide as much income and/or principal to my children as my Trustee deems appropriate for their education, health, maintenance and support.

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Factors to Consider:

 

If you choose to create lifetime trusts for your children, you should consider carefully what instructions you wish to incorporate into the trust to give your Trustee as much direction as possible as to how to make (or not make) distributions to your children.

 

You should also consider who will receive the assets or benefits from the trust on the child's death. Your child's spouse? Grandchildren? Your surviving children? Charities?

 

Choosing Trustees.

 

During any period of time that your children's inheritance is retained in trust, you will need a Trustee to manage and distribute the assets. Below are some factors to consider in choosing a Trustee:

 

1.   Individual as Trustee. 

2.   I want to name one or more individuals to serve as trustee.

  

Factors to Consider:  

• Do you know a family member or other person whom you would entrust with the management or your children's inheritance?

  

• Is this person likely to be willing and able to serve as trustee for your children for the time period that assets will be held in trust?

  

• Do you want to choose someone other than the person you've chosen to serve as your children's guardian? In other words, are you concerned that you are giving too much authority and control to one person?

  

•  Individual plus Professional or Institutional Trustee as Co-Trustees.

 

•  I want to name a person along with a Professional Trustee or Institutional Trustee to serve as Co-Trustees for my children. 

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• Do you know a family member or other person who would work well with a professional trustee or an institutional Co-Trustee?

  

• Is this person likely to be willing and able to serve as trustee for your children for the time period that assets will be held in trust?

  

• Does naming Professional Co-Trustee or Institutional Co-Trustee resolve the issues surrounding the appointment of the same person to serve as Guardian and Co-Trustee?

  

• Is the Professional Co-Trustee or Institutional Co-Trustee likely to listen to the advice and recommendations of the person you are appointing as Co-Trustee?

  

• How much turn-over is there among trust officers?

  

• Is the Institutional Trustee likely to be bought out by a larger bank headquartered in another metropolitan area?

  

• What fees will be charged? Will the Professional Trustee or Institutional Trustee charge a higher fee because you have named an individual as Co-Trustee?

  

• Is the Professional Trustee’s or Institutional trustee’s asset management philosophy similar to yours?

  

• Professional Trustee or Institutional Trustee Serving Alone.

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•  I want to name a Professional Trustee or an Institutional Trustee to serve as the sole trustee   for my children. 

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This may be the only option if there are no persons who are willing and able to serve as trustee.

  

Is the Professional Trustee or Institutional Trustee likely to give your children the personal attention they deserve? How much turn-over is there among trust officers?

  

Is it likely that the Institutional Trustee will be bought out by a larger institution headquartered in another metropolitan area?

  

What fees will be charged?   Will there be separate fees for trust administration and asset management?

 

Is the Professional Trustee’s or Institutional Trustee’s asset management philosophy similar to yours?  

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