Having at least a basic estate plan in place is important for every adult. If you are the parent of a young child, however, the need for careful estate planning is heightened. Your minor child cannot manage his/her own inheritance. Consequently, you must choose someone to do so for your child. The Grand Forks estate planning attorneys at German Law Group help you choose the right person to guard your child’s inheritance.
How Will You Pass Down Your Child’s Inheritance?
When you contemplate passing down assets to loved ones in an estate plan, you likely envision making gifts of those assets in your Last Will and Testament. A Will certainly is the most common method for passing down assets; however, there are several reasons why you may not want to rely solely on your Will to pass down an inheritance intended for your minor child. The primary problem with using your Will to pass down an inheritance to a minor child is that a minor cannot inherit directly from your estate. That means that a court will have to appoint an adult to manage the assets gifted in your Will until your child reaches the age of majority. A better option is to create a trust which allows you to decide who will manage your child’s inheritance.
How Does a Trust Work?
A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor”, “Trustor” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries as well as invests trust assets and administers the trust terms according to the terms created by the Settlor. Trusts are broadly categorized as testamentary or living trusts with the former activating after the Settlor’s death and the latter activating during the Settlor’s lifetime. For the parents of a young child, the most important aspect of a trust is the ability to choose the Trustee who will manage, invest, and distribute the assets held in the trust.
Choosing the Right Trustee to Guard Your Child’s Inheritance
A Trustee has numerous duties and responsibilities during the administration of a trust; however, the primary job of a Trustee is to manage the trust assets and distribute those assets according to the terms created by the Settlor. If you are creating a trust to hold the inheritance you plan to pass down to your minor child, some important considerations when choosing your Trustee include:
- Experience/skills – it is tempting to just appoint a spouse or family member; however, your Trustee will need to understand the applicable laws and financial concepts necessary to successfully administer the trust. If your spouse/family member lacks these skills, you may wish to consider appointing a professional Trustee.
- Willingness to honor your wishes – legally, a Trustee is required to abide by the trust terms as written by the Settlor. A Trustee must also have some discretion though. Make sure you appoint someone who will honor your wishes and further the trust purpose as stated by you, even if they do not agree.
- Absence of conflicts – try to appoint someone who is not likely to have a conflict of interest with the trust beneficiaries. This is another reason why a professional Trustee is often the best option.
- Willingness to serve – people often fail to sit down with a prospective Trustee and ask if he/she is willing to serve in the position. There are several legitimate reasons why someone might not feel comfortable serving, including the possibility that they might be grieving your loss and emotionally unable to handle the job.
Contact a Grand Forks Estate Planning Attorney
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about how to guard your child’s inheritance, contact a Grand Forks estate planning attorney at German Law Group by calling 701-738-0060 to schedule an appointment.