There is no incentive more powerful for creating an estate plan than becoming a parent. From the moment you learned that you were going to have a child you undoubtedly started worrying about protecting and providing for your child. While leaving your child a sizeable inheritance is certainly an important part of protecting and providing for your child, you cannot stop there. As a North Andover area estate planning lawyer at DeBruyckere Law Offices explains, you must also designate someone to guard your child’s inheritance.
Why Your Will …Won’t Work
Most people rely on a Last Will and Testament to pass down their estate assets when they create an initial estate plan. While a Will can be used to distribute your entire estate, there are several reasons why you may not want to rely solely on your Will to pass down an inheritance intended for your minor child. The most important reason that parents with minor children don’t want to use a Will to pass down a minor child’s inheritance is that a minor cannot legally inherit directly from the estate of a parent. Consequently, if you do gift assets to your minor child in your Will, an adult must manage those assets until the child reaches adulthood. Under that scenario, a court will likely be charged with choosing who that adult will be and you lose out on the opportunity to provide directions and/or instructions regarding how you want those assets to be managed and eventually distributed. Using a trust to protect your child’s inheritance is often a better choice for the parent of a minor child.
A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the “Settlor”, “Trustor” or “Grantor.” The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust’s beneficiaries as well as invests trust assets and administers the trust terms according to the terms created by the Settlor. Trusts are broadly categorized as testamentary or living trusts with the former activating after the Settlor’s death and the latter activating during the Settlor’s lifetime. For the parents of a young child, the most important aspect of a trust is the ability to choose the Trustee who will manage, invest, and distribute the assets held in the trust.
Choosing Your Trustee – 4 Factors to Consider
When you create a trust you will need to appoint a Trustee. A Trustee has a number of important duties and responsibilities; however, the most important one for you to remember is guarding your child’s inheritance. If that in mind, consider the following four factors when choosing your Trustee:
- Willingness to honor your wishes – a Trustee is legally obligated to abide by the trust terms as written by the Settlor. A Trustee must also have some discretion though which means that your Trustee needs to understand what you would do and be prepared to make decisions based on that knowledge. Make sure you appoint someone who will honor your wishes and further the trust purpose as stated by you, even if they don’t agree.
- Experience/skills – your first inclination may be to appoint a spouse or family member; however, your Trustee will need to understand the applicable laws and financial concepts necessary to successfully administer the trust. If your spouse/family member lacks these skills, you may wish to consider appointing a professional Trustee.
- Lack of conflicts – you should appoint someone who is not likely to have a conflict of interest with the trust beneficiaries. This is another reason why a professional Trustee is often the best option.
- Willingness to serve –if an individual is unwilling or unable to serve, nothing else really matters. All too often, people often fail to sit down with a prospective Trustee and ask if he/she is willing to serve in the position. There are a number of legitimate reasons why someone might not feel comfortable serving, including the possibility that they might be grieving your loss and emotionally unable to handle the job.
Contact a North Andover Area Estate Planning Lawyer
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns relating to the inheritance you plan to leave your young child, contact a North Andover area estate planning lawyer at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
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