Your Children and Their Inheirtance.

When you set up a living trust -- you will be faced with some choices on how to handle or set up your children's potential future inheritance. (I say potential because you could die broke.) This is where a good life insurance policy may come into play and be designed to leave an inheritance. You will want to discuss your life insurance policies with your attorney as well.

For children who are under the age of 18, you should consider having their share placed into a trust with income distributions while a minor to their guardian and distributions of principal once they reach a certain age. Say at age 25 they will get the rest. Or maybe you say half at age 25 and the balance at 30. The trust will allow for the successor trustee to make distributions to your child for education among other needs. A wedding could be paid for. A car could be paid for. And a haircut could be paid for from the trust. It all depends on how it is worded.

Generally, things to consider in making these kinds of drafting decisions depends on the age of your children, the amount of money involved and your level of concern.  There are three options (generally speaking):

1.    A distribution outright and free of trust if at least age 18;
2.    A distribution to a trust for that child with specific provisions and a termination at a certain age; or
3.    A trust for that child's life time.

If, for example,  the children are over 30 and have no tax, liability, health or marital issues, you may prefer an immediate outright distribution combined with trusts for grandchildren to an age if a child predeceases.

Here is one mother's take on this:  "I am the mother of a 20 year old and a 14 year old. My observation is that the average 22 year old college graduate may be mature in his or her personal conduct, but has limited experience in personal money management. For this reason, I would feel comfortable that money be held in a trust until at least age 25.  And then get the rest of the funds at age 25."

If your kids are different -- you can do different terms for each child or make the overall terms much more restrictive.

These kinds of things are best discussed with your estate planning attorney to find out what is best for your children and your wishes.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

Comments

[Hawley Roddick]

Ethical wills are a kind of insurance policy in helping parents' plan their estate for their children's benefit. I provide a free download of an ethical will guide at my Web site and also help clients write their ethical wills. Attorneys tell me the ethical will is invaluable, which is why an increasing number make it a standard item in estate planning.

[Rieka KLein]

I and my husband have cosigned for my step daughters mortgage. If we die is our estate still responsible for the cosign contract?

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