Young people often like to keep things simple. Millennials typically 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 generally say they want a simple will. This can be a wise choice if they’re recently 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. That may be a problem if your kids are apt to squander their inheritance in a few years instead of using the money wisely.
Even a modest 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 too much cash are often vulnerable to developing addictions.
A trustee, with the right directions from you, 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 can be directed to set up an experienced advisor to manage inherited assets along the way.
One option is to set up the trust so the beneficiary will become a co-trustee when your beneficiary is mature enough. 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 likely don’t want to allow them to receive and control your money at 18 without structure or rules in place.
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”