When you decided to leave your assets behind to your children, you want to ensure that their inheritance is passed down in the way you want. However, there are several common mistakes that can disrupt your good intentions.
Leaving Assets Outright to Kids
Doing no estate planning at all is one of the worst mistakes you can make, as whatever you are leaving behind will be managed by the probate court before being passed to whom the court determines should inherit, and there is a chance that it may not be who you would want. Now, your children will probably end up as the court’s choice, but only after time and money have been invested into the court hearings. Furthermore, if your children are still minors, the court will decide who handles the assets for them before they turn 18, and if a professional Trustee is appointed, the costs of handling the assets could drain what’s left for your kids.
Not Carefully Choosing a Trustee
Even parents who do the right thing and set up a trust to hold what’s being left behind for their kids sometimes do not think carefully enough about who the Trustee should be taking care of the assets. Do you want one trustee or a co-trustee who can ensure the funds are well managed? Choosing more than one can provide some accountability for how the funds are used.
Not Properly Protecting Assets Left In Trust
Another mistake parents make when setting up a trust is distributing the assets out of the trust directly to their children at specific ages or stages instead of holding those assets in a flexible lifetime trust that will protect their kids’ inheritance from future divorces, creditors, or lawsuits. Setting up a Lifetime Asset Protection Trust for your kids will allow them to have access to their inheritance without leaving it vulnerable to such events.
Neglecting to Fix Beneficiary Designations
Lastly, make sure your insurance policies are directed to your trust instead of to your children, because naming minors or even young adults as the beneficiaries of insurance and retirement accounts is a sure-fire way to ensure that the money is not used in the way you want, and your kids will be unnecessarily stuck in a court process. This is a huge mistake we repeatedly see, so check your beneficiary designations to make sure that this is resolved before it turns into a problem.
A trust can both provide for and protect your children after your death, as well as ensure you are cared for the way you want in the event of your incapacity. If you’re ready to set up an effective plan for your family’s well-being and care, start by sitting down with us. As your Personal Family Lawyer®, we’ll help you protect, preserve, and enhance what matters most.
This article is a service of Levi Alexander, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session™ and mention this article to find out how to get this $750 session at no charge.
Photo by cottonbro: https://www.pexels.com/photo/a-young-woman-using-a-laptop-beside-her-mother-6470988/