How to Help Your Children Through Incentives in Your Estate Planning
While it's true that one of the focuses of Idaho estate planning for parents is to help them determine who will receive their property after they die, this is not the only reason for estate planning. Parents with children often use their Idaho estate plan as a way of providing incentives for their children so that their children have a better chance of succeeding in their lives.
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When it comes to creating an estate plan that will help your children with incentives here are three specific things that you should consider.Your Child's Maturity
The first consideration that most parents make when creating a customized estate plan that will make distributions to their children is the age and maturity of their children. Most people would agree that young children are not capable of handling assets that are in an estate. In fact, Idaho law currently requires that any minor age children who receive a distribution from an estate have a legal guardian appointed for them who will take receipt of that property and hold it for them until they reach the age of adulthood, which in Idaho is 18.
For some children there is nothing wrong with this type of plan. However, many parents agree that most 18-year-old children, even if the law considers them to be an adult, are likely not mature enough to handle a large distribution of money, property, or assets. In fact, most parents would agree that it could be very damaging for an 18-year-old to receive substantial money or assets.
Through the experience and knowledge of our Idaho estate planning team, we often provide options and suggestions to our clients about ways they can make distributions to their children without "ruining" them. Perhaps the best suggestion that we make to our clients is that they determine an age where they believe their children will be mature enough to receive distributions from their estate. Until those distributions are made the property, money and/or assets are simply held in a trust and are used for the benefit of their children without actually giving these things directly to the children.
The ways the money, property or assets can be used for your children include for their health, maintenance, support, education, or any other reason that parents can think of. When money from a trust is used in this way the funds are paid to a third party for the benefit of the children. For example, if your child wants to go to college, the trust would write a check to pay for tuition, or rent, or other expenses directly to the college or landlord. This gives the child the benefit of an education, without placing the money directly in the hands of the child where it could be mishandled.
Some parents choose a staggered aged plan in which to make distributions directly to their child. This type of plan allows a parent to make multiple distributions to their children over time, when their child reaches a specific age. As an example, some clients will ask that distributions be made from the trust directly to their child at the age of 25, and then 30, and then the last distribution will be made at 35. Whether a staggered distribution is used or a single distribution is chosen, the most important thing is for a parent to decide the specific age they believe their child will be mature enough to handle the assets or money that will be given to them from your estate.Your Child's Financial Knowledge
Another way to incentivize your child through your estate planning is by requiring your child to obtain a certain level of financial education or knowledge before distributions are made from your estate to them. I've heard of a parent who made a provision in their trust that no distributions would be made to their children until they provided adequate evidence to the named trustee that they had completed the Dave Ramsey Financial Peace University course. This parent believed that if their child completed that course they would have at least a basic understanding of financial knowledge that would assist them not only with the distribution from the estate but also throughout the remainder of their lives.
I've heard of other parents who will incentivize their children's lives through financial knowledge by stating in their trust that at a certain age that trust would match the exact amount of money their child had actually saved in a financial institution. Again, this child would be required to provide adequate proof to the trustee that the money had actually been saved and that it was not a loan or some other type of funds that had temporarily been placed in a bank account.
While whatever plan you choose to follow should not be too complicated, there are no limits on the types of financial knowledge incentives that a parent can put into their estate planning to benefit their children. Each parent has the best understanding of their own children and their children's personalities. For this reason, if a parent is concerned about the financial knowledge or ability of their children they should raise this question with their estate planning attorney and discuss the options that are available that might help their children succeed.Your Child's Preparation for a Career
An additional way that parents can use to incentivize their children is to put education or training as a requirement for distribution. As an example, many parents will provide instructions in the trust that no distributions are to be made unless their child is working towards a specific college degree or vocational training program. Alternatively, some parents will require that their child be gainfully employed for a period of time before any distributions are made from a trust. Some combination of these two things is also possible.
Again, the goal is not to control your child's life from the grave. Rather, the goal is to incentivize your child to make good decisions that will be helpful to them the remainder of their lives. If a child chooses to not meet the requirements set forth in the trust, then no distributions from the trust will be made to the child. This would be the child own decision.Enlist an Idaho Estate Planning and Probate Attorney to Help You
Our experienced Estate Planning team of attorneys can help you and your family with your Idaho estate plan or with your probate needs. Whether you are seeking your own customized Estate Plan or are in need of a Probate for a loved one who has passed, we are available to discuss your options and answer your questions at an initial consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a consultation with the Racine Olson team. You can also email us directly at firstname.lastname@example.org. We will answer your questions and will help you solve your Idaho Estate Planning and Probate problems.