Using a Trust When You Have Young Beneficiaries

Young Beneficiaries

Getting an Estate Plan in place is an essential but complicated process. Everyone’s situation is different, and that is why I always recommend hiring an Estate Planning Attorney to listen to your unique circumstances and utilizing their knowledge of the law to put together a plan that works for you and your heirs. With that being said, a Revocable Trust is a document that often comes up when I speak with clients —with varying preconceived notions. There are several ways this type of document can come into play in an Estate Plan and having young beneficiaries is one to consider.

Minors can’t legally manage their own property or accounts, so an adult must do so for them. The court will appoint someone to oversee their inheritances for them until they come of age if you don’t name anyone in your estate plan. A revocable trust can avoid this court involvement and allow you to set out not only who will manage their assets but how they will manage their assets.

Many parents and grandparents choose to terminate a minor’s trust when the child reaches a certain age, such as 25 or 30, when they believe the minor will be mature enough to invest, spend, and manage their inheritance. The trust is terminated by distributing the remaining assets outright to the beneficiary when they reach that specified age but it is important to note that at that point the assets are considered to be the beneficiary’s property, and they become available for creditors’ claims, including judgment holders in lawsuits. The property also becomes vulnerable to a spouse in divorce proceedings —so the language chosen to set this “termination event” is very important.

You can continue the trust for the benefit of a young beneficiary, so it lasts throughout their entire lifetime. No rule says the trust must terminate at a certain age.  This type of trust language can create an asset protection barrier between the beneficiary and the beneficiary’s creditors as the beneficiary gets older if it’s appropriately drafted. The assets held in the trust remain there for their benefit and out of the pockets of creditors and spouses because they don’t technically own them—the trust does.

A trust can be drafted to not only protect young beneficiaries from outside influences but from themselves as well if you know that they’re not good with managing money, and you worry that they’ll deplete their inheritance in record time. It can safeguard estates against a beneficiary’s own bad decisions or excessive spending habits.

There are many benefits to creating a Trust but I still believe it’s very case specific and that not everyone “needs” a Trust and so I discuss at length how a Trust could benefit a particular client’s situation and when they would not be a value or not.

Heidi S. Webb, Attorney at Law serves clients in Daytona Beach, Ormond Beach, Port Orange, Melbourne and beyond with matters of Elder Law, Estate Planning, and Probate Law.   Contact her today to schedule a free consultation. Visit her page on Facebook, or see what her clients are saying to learn more about Heidi.

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