Young people like to keep things simple. Millennials don’t want their parents’ furniture or antiques. They want to be able to move easily without a lot of headache. Millennials are okay with jewelry, art, and cash. Likewise, with estate planning, Millennials want a simple will. This can be a wise choice if they’re just married and under the estate tax threshold. But when they have children of their own, they should consider a trust.
Forbes’s recent article, “Why A Simple Will Won’t Cut It If You Have Young Children,” explains that without a trust, minor children inherit assets outright when they turn 18. And that may be a problem if your kids are apt to blow through their inheritance in a few years, instead of using the money wisely.
But an inheritance could last a lifetime if the beneficiary lives within her means, doesn’t tap into the principal, and works to help support her lifestyle and supplement her income. But this isn’t always the case, and individuals with access to so much cash are often vulnerable to developing addictions.
A trustee can make certain that your children and young adults are cared for long-term. If you’re not alive to guide and direct your children, a trust can set the necessary limitations for their finances. Also, the trustee can help with your children’s financial literacy, so they’ll possess tools if and when they’re given additional responsibility for their inherited assets.
This isn’t just for minor kids who are under 18 years old, but also for young adults. The fact that a child is “legal” in the eyes of the law doesn’t mean she’s responsible enough to invest a million-dollar inheritance. A trust sets up an experienced advisor to manage inherited assets along the way.
One option, when they’re mature enough, is to set up the trust so they will become a co-trustee. This lets them have a say with the trustee and to make decisions about the management of the trust assets. Your trust can also give them access to distributions of principal slowly over time, so they get used to managing large sums of money.
Simple solutions can work for some people, and there are definitely situations in which a simple will is appropriate. But if you have minor children, you don’t want to allow them to let them inherit money at 18.
Ask your estate planning attorney about the options available to set up a trust to work for your family.
Reference: Forbes (July 12, 2019) “Why A Simple Will Won’t Cut It If You Have Young Children”
Suggested Key Terms: Estate Planning Lawyer, Wills, Trusts, Trustee, Asset Protection, Inheritance