A trust provides benefits beyond what beneficiary designations accomplish.
When it comes to estate planning, every family and individual family member is different.
Although people may have similar assets, they have unique goals and circumstances.
All of these variables influence whether a trust should be including in an estate plan.
According to a recent Nj.com article titled “Do I need a trust in case something happens to me?,” one important variable is the age of children.
Although beneficiary designations may be sufficient with a spouse and adult child, relying on these could create problems with a minor child.
If you leave an outfight inheritance to a minor, the child will not be able to control the assets until he or she reaches the age of majority.
That is age 18 is most states.
Prior to this birthday, a guardian or custodian will manage the assets with the oversight and involvement of the court.
This can be both expensive and inefficient.
Even when your child becomes an adult legally, problems may still exist.
Your child may not be financially responsible enough to manage a windfall inheritance.
He or she may also develop addictions or special needs.
As I remind my clients: “some children grow up … and other children just keep having more birthdays.”
What options are available?
Including a trust in your estate plan can be a wise option for parents with minor children.
You will designate a trustee to manage the assets held in the trust for the benefit of your child.
The trustee will act according to the terms of your trust.
If you do not want your child to receive all of the inheritance at one time, you can provide a timeline.
For example, you could designate partial distributions at ages 25 and 30 with the final distribution at age 35.
Alternatively, the trust can continue throughout the lifetime of your child and even include their children.
This generation-skipping transfer tax trust can be a savvy tax play, let alone provide powerful asset protection for and/or from your child as needed.
You can also require incentives to be accomplished before distributions are made.
You can set up a trust while you are alive or set up a testamentary trust in your last will and testament.
With a testamentary trust, your death will trigger the creation of a trust account according to the terms in your last will and testament.
Because estate planning involves a multitude of variables, schedule an appointment with an experienced estate planning attorney to set up a plan to best meet your needs.
Reference: nj.com (June 14, 2021) “Do I need a trust in case something happens to me?”