Options for Passing Your Wealth to Young Kids When You Die
By Lane V. Erickson, Idaho Estate Planning Attorney
The great thing about estate planning is that it is flexible enough to be able to meet your specific and unique circumstances. In other words, it doesn’t matter whether you are young or old, wealthy or not, married or single, or whether you have children. A well-crafted estate plan is designed to help you individually with your own specific needs, to protect you throughout your life, and to provide for your family and loved ones when you die.
At Racine Olson, we pride ourselves in helping each of our individual clients with their unique needs. Our firm is on the cutting edge of all estate planning and probate options. We have been helping our clients resolve their estate planning and probate concerns for over 70 years.
This breadth of experience involves a team approach. Our experienced and highly skilled attorneys include partners Randy Budge, Lane Erickson, and Nate Palmer, with attorney Dave Bagley acting of counsel. Each attorney on our estate planning team has earned the highest reviews possible from past clients. Additionally, each of our attorneys has the highest rankings possible from several legal rating services including AVVO, Justia, and Martindale & Hubbell. Our team of Idaho estate planning attorneys have the expertise and knowledge to benefit each of our clients specifically and individually.
From our experience we understand that most people don’t know how to begin their estate plan. To help our clients with an easy way to get started, we provide a simple Estate Planning Questionnaire they can download from our website and fill out to collect the information needed to make decisions about their estate plan.
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Many of our clients have young children of their own or other family members who are young that they want to leave a part of their estate to. The purpose of today’s article is to describe some of the options available on how to do this. Keep in mind that this is just a summary. If you have questions or concerns, we encourage you to schedule your free 30-minute consultation so we can answer your specific questions.Outright Transfer - May Involve Guardian
One of the first options is to leave a portion of your money, property, or other assets outrightly to a young child. In Idaho, a person is considered to be a minor, if they are under the age of 18. In other words, anyone who is under the age of 18 has to have a legal guardian. This is usually the person’s parents. However, if they have no living parents then a legal guardian will be appointed by a court.
If you leave a portion of your estate to a person who is under the age of 18, that transfer will actually go to that child’s legal guardian instead. The legal guardian is required to hold that inheritance for the young child until they reach the age of 18. Then, unfortunately, regardless of what the guardian wants to do, or whether that child is mature enough to handle it, the legal guardian is required by law to give to that child their inheritance.
Some children are mature enough to handle an inheritance at the age of 18. However, most kids even though they are 18 and considered by law to be a legal adult, lack the maturity and the experience to handle an inheritance. This is truer when it comes to a sizable inheritance. Because of this, I often recommend that parents not choose this option.Minor’s Trust - Testamentary or Independent Trust
A better option is to utilize what I call a Minor’s Trust. This type of trust can be set up as a testamentary trust or as an independent trust. Each of these will be discussed in more detail.
A Minor’s testamentary trust is a trust that is set up in your last will and testament. It is designed to only be created as a trust if the circumstance arises where it’s needed. An example would best illustrate how this works.
In your last will and testament, you would have specific instructions stating that if your child is under a certain age when you die, then your written will creates a trust that will receive the inheritance that is going to your child. For example, let’s say that you are a parent in your thirties. You have a child who is 12 years old. You would rather that your child not receive an inheritance at the age of 18 if you were to die while they’re young. Because of this, you set up a Minor’s trust in your written will that says that your child will not receive their inheritance until they reach the age of 25. In this instance, the Minor’s trust would be created, and the inheritance distributed to your child would actually go into the trust and be held and kept safe for them until they reach the age of 25 at which time it would be distributed directly to them.
There are a number of different options on how a Minor’s trust works. Some parents will do one distribution at a certain age. Others, however, will you choose staggered distributions to occur at different ages such as 25, 30, and 35. In the meantime, the trust will provide for the child’s education, health, support, and maintenance, at the trustee’s discretion. This allows the trustee to help a child in certain ways, such as working toward and attaining higher education goals such as college or technical programs.
Additionally, some parents will also include incentives in a Minor’s trust. For example, a parent may state that the first distribution at the age of 25 will not occur unless the child can prove to the trustee’s satisfaction that they have successfully completed or are currently enrolled in college classes or a technical program leading towards an actual degree or certification.
As a second alternative, a stand-alone trust could be created by a parent. This type trust is actually created prior to the parent’s death. This trust could be funded prior to the parent’s death as well. Or, the parent could use their written will as a way to fund this trust when they pass away. The options available when using a standalone trust are similar to those that are used in a testamentary trust. The only difference is when the trust itself is actually created and/or funded.
As you can see, when it comes to leaving an inheritance to a young child, there are many options. We encourage you to contact us for a free consultation so that we can discuss your specific circumstances and help you come up with a plan that will fit your needs and best help your young children. We have assisted numerous clients in coming up with a plan that works to protect them while they are alive, to help their young children, and to make distributions to their family and loved ones after they die. We are confident that we can help you too!Enlist an Idaho Estate Planning Attorney to Help You
Our team of Idaho lawyers can help you with any of your estate planning or probate needs. Whether you are seeking to create or review an estate plan for yourself or would like to help a loved one, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a free consultation. You can also email us directly at firstname.lastname@example.org or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho estate planning problems.