Protecting Young Beneficiaries with an Estate Plan
Are there young people in your life that you want your assets to go to in the event of your passing? This is especially important if they are minors. Do you have the correct structures in place to ensure your assets are protected for the young person's benefit?
Whether its your children, grandchildren, nieces, nephews, cousins, friends, or whoever - planning for young beneficiaries is critical to protecting your legacy, and your beneficiaries.
What if you do nothing? Won't the court just sort it out?
If the beneficiary is at least 18 at the time of your passing, their share of your assets will be given to that young person outright. Essentially, a check will be written to your loved one, giving them full access and control over the funds.
Are they ready for this? Would they know how to manage the funds? How would it impact their lives? Would they know how to protect themselves from others?
You know your loved ones more than I ever will. Some young adults are perfectly capable of managing their own inheritance. Of course, the opposite is true - there are plenty of young adults who would be completely lost, become vulnerable to outside influences, and their life path would be altered in a way you do not want.
If the beneficiary is a minor (under 18) at the time of your passing, their share of your assets will be protected until 18, 21, or 25 - depending on what the court decides. During the time the assets are protected, they may be blocked entirely, or be managed by a professional trustee. In either scenario, the court will be involved until the “age of majority,” costing attorney's fees and removing any privacy. Once the funds are fully released, there is a public record showing how much. This leaves them vulnerable to outside influences.
What can you do to make sure it gets sorted the way YOU want?
You have several options to protect your young beneficiaries. Here's a few common options:
Testamentary trust - a trust created under your will.
Sub trust as part of your revocable living trust.
Irrevocable trust that comes into being now. Then, you could name this irrevocable trust as the beneficiary under your other planning documents, such as your will and beneficiary designations on accounts (where appropriate)
You can read more about trust options on my blog.
For all these options, you need to decide:
When the funds will be given outright to the young person. A common approach is 2 or 3 payouts at percentages you set, for ages you decide. Perhaps 25% at 21, 50% at 25, rest at 30.
Who will hold the funds until the young person is ready. This is the trustee. It is critical to choose a financially responsible person who will treat the funds the way you have in mind, or you can choose a professional.
Under what circumstances can the trustee use the funds for the beneficiary. A common approach is to allow the trustee to spend the funds for the young person on anything related to their health, education, maintenance, or support.
Schedule Your Consultation and take the first step toward creating a complete estate plan that protects what matters most to you and your loved ones.
