When people think about using trusts for someone’s inheritance, they often picture incredibly wealthy individuals whose children will never need to work. However, trusts are actually beneficial for many middle-class families, not just the extraordinarily wealthy.
If you have minor children, adding a trust to your estate plan is a smart decision. Why do those with children as their intended beneficiaries decide to use a trust to pass resources to their children when they die?
They don’t have work to worry about guardian financial abuse
In a scenario where a child’s parents die, they may end up in the care of a guardian. That guardian will have control over their daily lives and their finances, including their inheritance, until they reach 18. Your estate plan should also name who you want to be guardian for your minor child. Most parents find this is more important to them than the financial aspects of the estate plan.
Even if you trust the person you name as guardian, good people can do unethical things when they stand to profit financially from the situation. A trust will limit or prohibit a guardian’s use of your child’s inherited resources. It will also create a legal framework for investment of funds and distributions to support your children and when you ultimately want the funds distributed to them.
Their children can qualify for state aid
While your children are young and trying to cope with a recent family tragedy, they may quality for government support and college assistance, Directly inheriting a significant amount of money would affect your child’s ability to qualify for many important government benefits.
The structured distributions that you arrange for in the trust you create can be enough to augment your child’s quality of life without disqualifying them for important benefits.
The children have a second adult for support
Typically, the guardian taking care of your children will be the one who handles all of their affairs. If the guardian doesn’t treat them with kindness or dignity, there may be a few options for the child to seek support.
When you have a different adult named as the trustee, their involvement in your child’s life could provide them with support when they feel anxious, alienated or afraid. It also provides your guardian with a second person to review financial matters.
Adding a trust to your estate plan can be a smart move for the protection of your children in case anything ever happens to you.