Trying to give children every advantage in life is the prerogative of most modern parents. They procure medical treatment for their children as necessary and enroll them in school. They probably dream of watching their children start careers or families in the future. Unfortunately, not every parent lives to see their children reach adulthood. Illness, accidents and criminal activity could all deprive children of their parents while they are still minors. Those who lose their parents at a young age often face serious struggles, including financial hardship.
Parents can minimize how difficult the future might be for their children through careful estate planning. Naming a guardian is an important way to ensure children have proper support in the future. Leaving financial resources can also be important. Parents may need to think carefully about the inheritance they would like to leave for their underage children.
A direct inheritance comes with risks
Underage children are often among the beneficiaries that people want to leave their property to when they die. However, minor children cannot legally control their own resources. Their parents or guardians have authority over their assets.
If someone’s parents die, their guardian could control their inheritance until they turn 18. Improper planning could lead to someone squandering the resources that could help someone’s children start off their adult lives. Even those who are usually ethical and responsible may mismanage assets that don’t belong to them. Parents can plan to avoid the possible abuses that might occur in that situation by creating a trust. People can transfer some of their property, like their home, to the trust. They could also fund it with life insurance proceeds.
Trusts can have numerous restrictions on asset distribution. Someone can set resources aside until their children turn 18 or limit what scenarios would allow the guardian to request funds from the trust. Having someone other than the guardian serve as the trustee for the children’s inheritance can help minimize the risk of financial misconduct. Every family’s circumstances are unique, and parents may need to think carefully about their children’s needs when putting together an estate plan.