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All of us who have children want to make sure that if (or should I say when) we die, our children are taken care of, that medical expenses they have are paid, that they are educated, and have the necessary funds for maintenance and support. Most parents say they prefer that their children, particularly if minors, do not receive an inheritance all at once at age 18 (which is the age of majority in California). Many young adults at age 18 and even older, lack the maturity and experience to manage even a modest sum of money. Some 18 year olds would head out to the nearest car dealer rather than plan for the future with an IRA.
There are definite benefits to your children if you leave them their inheritance in the form of a trust so that instead of assets going outright to them at a certain age, the money goes into separate trusts for each children. Some of the benefits are the following:
1. Spreading out distributions over time intervals. Perhaps you want to leave 1/3 of each child’s portion of the estate to them at age 21, another 1/3 at age 30, and the balance at age 40. Other parents choose to leave a certain percentage of the estate when the child graduates from college or vocational program, another distribution upon marriage, another distribution upon the birth of a child, purchase of a home, etc.
2. Keeping assets out of the hands of your child’s creditors, a bankruptcy, or a judgment in a lawsuit. If your child does not receive all of his or her inheritance at once, there is less for creditors to reach in the event that your child has financial or legal problems.
3. Provisions about substance abuse. In a trust, you can add provisions that give your trustee the discretion to ask a beneficiary to submit to a mandatory drug test if the trustee feels that the beneficiary is using illegal substances. You can also put provisions in the trust to pay for expenses for drug or alcohol rehabilitation before receiving a distribution.
4. Provisions for distributions if your child predeceases you. If a child of yours passes away before receiving all of his or her inheritance, do you want your grandchildren to receive their parent’s share or do you want your other surviving children to take that share?
5. Special Needs Trusts for disabled beneficiaries. One of the biggest concerns for the parents of a disabled child is how to leave an inheritance for that child and not impact their ability to receive government benefits. Many disabled children and adults receive SSI or a form of MediCaid and need such benefits to continue. One of the important aspects of a revocable or living trust is that you can add provisions for the establishment of a special needs trust for any disabled child.
6. Customized provisions unique to your situation. Another invaluable benefit to a children’s trust is the ability to set forth provisions that are customized to your family. As an example, maybe you want to be sure your child is raised in a particular faith. You can add provisions in your trust and nomination of guardians about preferences as to the way they should be raised. You may want to provide that your children can live in the family home with their guardian or you may want to authorize the trustee to use trust funds to enable your minor children to visit relatives.
For more information on Wills, Trusts, and Estate Planning visit CarolRonquillo.com/blog
Article Source: sooperarticles.com/law-articles/how-living-trust-protects-your-children-10674.html
About Author:
Carol A. Ronquillo has been in attorney in the San Diego, CA area for over 34 years and has devoted herself exclusively to estate planning for over almost a decade now. For more information on Carol A. Ronquillo and her practice, visit CarolRonquillo.com.Author: Carol Ronquillo