Trust Advisor explains in its recent article “Should You Create Trusts for Your Children?” that if minors receive assets before age 18, a guardian of the property must be appointed to oversee those assets for the child.
Guardians typically need to be bonded and must file a formal accounting with the court each year with a petition for approval. All of the costs are paid from the child’s funds.
Another option is to instruct that a trust be created for each minor child in your will at the death of both parents. In the will, you can state that the trustee doesn’t need to post a bond or to file an accounting with the court every year.
Setting up a trust for a minor child is usually easier and less expensive than leaving the assets outright to a minor child and having a guardian appointed. Many estate planning attorneys recommend that even if you think your children will be over 18 when both spouses die, consider keeping the assets in a trust for the children to protect them from themselves. It is recommended to wait until they reach a specific age, when they would be best ready to handle the assets. For some, this might be age 30 or 35, or older. Other parents set up the trust to continue for their entire lives to protect the assets in the trust from future claims of the child’s creditors, or in the event that he or she goes through a divorce. Assets that continue to be held in the trust, can’t be touched by a child’s current or future creditors.
Trusts can have considerable flexibility. For instance, the trustee can be given the authority to make liberal distributions to the child for any reason the trust creator wants or for no reason at all. At a certain specific age, the child can also become a co-trustee of his or her own trust and be given the power to remove and replace the co-trustee making the distribution decisions. That can give the child significant control over his or her own trust.
There are many reasons to create trusts and every family situation is different. It’s important to work with a qualified estate planning attorney on these issues in order to create a plan that works best for your family.
Reference: Trust Advisor (March 28, 2017) “Should You Create Trusts for Your Children?”
For a free estate planning consult, including planning for minor children, call our office at 801-438-7120.