Top 3 Pitfalls To Avoid When Leaving Money To Children
Thursday, February 1, 2018
Most want to ensure that their children, or other minor loved ones, are taken care of upon their death. However, without the proper estate planning, the money you leave behind might not be used in the manner you intended.
Following are some pitfalls to consider when leaving assets to minors or young adults.
1. BENEFICIARIES INHERITING AT THE AGE OF EIGHTEEN
Imagine what would have happened if you had inherited a significant amount of money at the age of eighteen. Like all of us, you would have bought a new car and driven it until there was no money left for gas. Without the proper estate plan, you risk that the assets you leave to younger beneficiaries will not be used for the purposes you want, such as paying for college.
Drafting an estate plan will allow you to control at what age the beneficiary will have control over the money. The documents will outline exactly how the money should be spent until that age – for example paying for education or medical needs. You ensure that when the beneficiaries assume control over the money, that they will have the financial maturity to spend it wisely.
2. NOT NAMING A TRUSTEE
Without an estate plan naming who will be in charge of a child’s money, the Court will appoint someone to handle the assets. It may not be who you would have chosen. The Court may appoint a professional Trustee to handle the assets who will charge for their services, draining the assets available for the children.
By naming a Trustee to be in charge of the assets, you will have the peace of mind knowing that someone you know who is financially responsible will manage the money for the child’s benefit. You can name two people to work together, as well as a Successor Trustee, should the initial person you name become ill or pass away.
3. INCORRECT BENEFICIARY DESIGNATIONS
Even those who set up a Revocable Living Trust to safeguard that the inheritance left to children is protected can make the mistake of not updating the beneficiary designations on their life insurance, retirement accounts and annuities.
Naming a minor or young adult as the beneficiary of your life insurance, retirement accounts and annuities is a guaranteed way to ensure that the monies will not be used the way you want. By naming your Trust as the beneficiary of these assets, you can control the money from beyond the grave, protecting your children after your death.
The right estate plan can both provide for and protect your children and other loved ones after your death. Having a plan in place will allow you to decide when and how your children will get the assets and who will manage the money for them until they are mature enough to handle the money for themselves.
To create your own estate plan, call the Law Offices of Jacobs & Jacobs, P.A. to schedule an appointment in our Vero Beach or Port St. Lucie office. Let our family help your family.