The unsettling thought of what would happen to our children should we unexpectedly pass away is something no parent wants to dwell on. Yet, it’s a critical consideration, especially when it comes to their financial well-being. Who would take care of them? Would they have sufficient funds? And importantly, who would oversee those assets until they come of age?
At James H. Wilson Law Firm, we understand your concerns. That’s why we encourage parents not to leave this up to chance. While some opt to leave assets to each other, with the children as subsequent beneficiaries, others — especially single parents — choose to bequeath property directly to their offspring. Regardless of your familial structure, it’s essential to appoint a trustworthy individual to manage any potential inheritance if it falls into your children’s hands before they reach adulthood. This can be efficiently arranged through your will or a living trust set up with our guidance.
Failing to specify how your children’s property should be managed should they inherit it before turning 18 could result in a court-appointed property guardian. This is often the other parent but can vary. This court-mandated route involves regular reporting and limited decision-making powers over the estate. However, should the estate be modest, some state laws permit an executor to choose a custodian under the Uniform Transfers to Minors Act to manage the minor’s assets.
Once children reach 18 or older, they assume full control over their assets, unless otherwise noted in legal documents.
There is an array of strategies that can be employed to make sure your children are financially secure and that their inheritance is managed competently. Here, we outline four straightforward and effective methods to ensure your wishes are honored.
Your will serves as an ideal tool to name a property guardian for your children. Should the need arise upon your passing, the court recognizes your designated individual to oversee any inherited assets if other protocols like a trust don’t already facilitate this.
The Uniform Transfers to Minors Act (UTMA), adopted by nearly every state, allows you to nominate a custodian for managing your child’s inheritance within your will, trust, or insurance policy. The custodianship continues until the child reaches the age determined by state law, typically 21. If you prefer a more extended period before the child takes ownership, a trust might be more suitable.
You may opt to set up individual trusts for your children, naming a trustee to administer the assets until a specified age. This setup, outlined in your will or trust documentation, obligates the trustee to act in the beneficiary’s best interests. Once the predetermined age is reached, the trust ceases, and the remaining assets are transferred to the beneficiary.
For families with multiple young children, a single ‘pot trust’ could be an efficient solution. Appoint one trustee to manage the combined assets, disbursing funds according to each child’s needs. This type of trust comes to an end when the youngest child reaches the age you’ve specified, allowing for distribution of the inheritance.
Example:
Consider the scenario of Nick and Nora, who have three children aged 4, 5, and 10. Their estate plans dictate that should they pass, everything is left to their surviving spouse with provisions for a ‘pot trust’ should the worst happen to both. This would place Nora’s sister, Chloë, as the trustee, giving her the authority to manage the trust’s holdings and cater to the children’s needs as she sees fit.
For comprehensive assistance in setting up proper management of your children’s inheritance, please contact James H. Wilson at 804.740.6464. Our legal team is dedicated to ensuring your peace of mind by securing a sound financial future for your children.