It is certainly wise and thoughtful for parents to provide for their children in the tragic event that both parents are taken away while the children are still minors. However, some parents provide the assets and the funds without any thought to how they will be managed. This can produce some unfortunate results. Often this is a result of misinformation and misunderstanding. Here are a few ways that a lack of planning can lead to less-than-desirable results:
- Just leaving a will and naming a guardian is not enough to guarantee that your children’s needs will be cared for in the way that you desire. When only a will is in place, the court will control the funds in the inheritance. The courts will distribute the entire amount to each child as they reach legal age.
- When the court appoints a guardian for your children, the process can be painfully slow and unnecessarily expensive. All expenses for court fees and lawyers will come directly from your child’s inheritance.
- If children inherit assets while they are still minors, the court will have to appoint a lawyer to protect the interests of the child. This can be expensive and may keep a child from being benefited by the assets that were left to him.
- Even when custodial accounts are set up to expedite these types of financial issues (such as the Uniform Transfer to Minors Act or the Uniform Gift to Minors Act), there can still be barriers to the child having access to the funds. When the amount is significant, it may require court approval.
The establishment of a trust fund is a far superior method for distributing assets in a beneficial and efficient manner. You can set up a child’s trust in your will. This gives you control over the management of the inheritance by letting you choose the manager rather than the courts. You will also have control over when the children inherit the assets.
A preferred option for many parents is the establishment of a revocable living trust. Whether you are incapacitated or deceased, your chosen trustee will manage the assets for your children until they reach the age that you have determined is appropriate to allow them access to the assets. The choices and decisions will be in the hands of you and your trustee rather than in the hands of the courts.