Many clients have kids who are very mature. Some have kids who are great with money. A few might even have kids who work in financial services and have a very sophisticated knowledge of money. Then there are those clients who have kids that aren't old enough to take care of their own money. Some might have kids who are old enough, but are not the best at handling it. A few might even have kids who seem to always need it, but never have it. Regardless of which category you might fit in and how much money you have, a children's trust can be an excellent tool for you to utilize in your estate plan.
The first question that you should ask yourself is why you are leaving your hard-earned money to your kids. Even if the only answer is that you don't want the courts and lawyers to get it, you should still keep reading. Remember, a properly funded revocable living trust will help you avoid probate and properly drafted children's sub-trusts can help your children avoid it as well.
Now if the answer to the question (as it is with many folks) is that you want to provide for your kids, protect them and give them the opportunity to put that money to good use, then a children's trust could be VERY beneficial to you.
To really understand why, it is probably a good idea to review some of the problems with outright distributions:
- Affluenza - "Thanks Mom and Dad! I'm rich! I'm going to go buy a new ___"
- Lack of Protection - Outright distributions are not protected from creditors and predators
- Minor Children - Do you want the court determining how and when your money should be used to take care of your kids?
- Lawsuits - It doesn't matter how financially savvy or responsible your kids are. Outright distributions will put your funds at risk.
As these problems suggest, protecting your kids has less to do with who they are than you might think, and more to do with your estate planning objectives.
A Potential Solution:
Continuing children's trusts are a tool that you can utilize to protect your children. While no method of protection is bullet-proof, not providing any protection is not a solution to the problem. A children's trust can be drafted to address these problems affecting minor and adult children, while providing flexibility to you as to how distributions will be made. This trust can be "tacked" on to your Revocable Living Trust so as to make it "continuing" and give you control over your kid(s') inheritance during your lifetime so you aren't forced to give away your assets when you still need them.
If you think you might want to implement a children's trust in your estate plan, or if you want to understand the pros and cons of continuing trusts specific to your circumstances, feel free to contact us byclicking here.