Many people’s primary estate planning goal is to protect and provide for their children. Proper estate planning will provide many opportunities to offer your children financial security, but not all strategies are created equal. Consider the four guideposts below when creating a kid-conscious estate plan.
How can my estate plan protect my child?
- Avoid outright distributions to minors. An outright distribution is when a beneficiary receives all the assets left to him or her in one lump sum. If a person dies without an estate plan, and his or her children are minors, the Court will appoint someone to manage any inheritance until they are 18, and then send them a check for the full amount. Responsible financial habits come with a lifetime of experience, and many 18 year olds would struggle to handle such a windfall properly. A well-crafted estate plan avoids outright distributions in favor of a more supervised approach.
- Choose your trustee wisely. The revocable living trust is a common estate planning structure where you choose a trustee to manage the distribution of your assets, instead of the Court. If you have minor children, your trustee will have discretion over how and when to spend your children’s inheritance for their benefit. You should choose a trustee whose approach to money management is in line with your own, as he or she will likely influence your children's developing financial minds.
- Leave your children’s assets in trust. Through thoughtful estate planning, you can establish a trust that protects your children’s inheritance from future creditor claims, divorce proceedings and legal judgments. A person cannot create this kind of asset protection for him or herself; it is a tremendous gift to your children’s financial future.
- Nominate guardians as part of your estate plan. No parent’s estate plan would complete without nominating legal guardians for your minor children. You should nominate three candidates for permanent guardian and at least two for temporary guardian, who live within 20 minutes of your home.
Find some great tips for choosing legal guardians in our Legal Guardian Nomination Guide below.