One of the most valuable parts of estate planning is making a plan for your minor children. Leaving an inheritance that considers minor children has unique challenges and responsibilities. Taking the time to properly plan, you can ensure the long-term needs of your children are met. Here are common mistakes people make when leaving assets to children and some ways we work to avoid them when crafting your estate plan:
Avoiding Estate Planning
Perhaps the most common mistake is not planning at all, or delaying it. Without a will, trust, or guardianship plan, the courts will determine your children’s future. Procrastination is one of the most significant risks when planning for minor children. Without a will, trust, or guardianship plan, the courts will determine your children’s future.
Avoid this by starting your estate planning early, even if your children are young. As your children grow or your circumstances change, revisit to review and change your plan as needed.
Failing to Appoint a Guardian
Naming a legal guardian is a key component in estate planning with minor children. Without naming a guardian, you leave the decision to the courts. Not only can this result in your children not being cared for by the person you would have preferred, it can also lead to delays and disputes among family members.
Avoid this by naming a trusted guardian if something happens to you. Your named guardian should be financially responsible and be someone you would trust to make decisions for the welfare of your child. Be sure to also discuss this choice with the person you’ve named to confirm they are will and able to take on the responsibility.
Leaving Assets Directly to Minors
Legally speaking, minors cannot own property or manage large sums of money. Without a trust or custodial account, assets may be tied up in probate or managed by a court-appointed conservator until the child reaches adulthood.
Avoid this by setting up a trust. The trust can hold and manage assets on behalf of your child. You can appoint a trustee to oversee the funds and distribute them according to your instructions but also allow for flexibility. For example, you can set up a trust to distribute funds on a staggered basis, so that children receive their money in installments (such as age 18, 21, 25, 30, etc). You can also allow your trustee to have discretion to distribute additional funds when needed for education purposes, health needs, or starting a business.
Neglecting to Plan for Special Needs
If one of your children has a disability or special need, leaving them an inheritance without careful planning can disqualify them from government assistance programs. Take careful consideration in how to plan for your child’s ongoing or long-term needs without disqualifying them from assistance.
Avoid this by discussing your concerns with Mathews Law, PLLC directly as there are multiple options for proactively planning for special needs while ensuring they remain eligible for benefits.
Failing to Update Beneficiary Designations
As noted above, minor children cannot legally manage large sums of money. If your life insurance policies or retirement accounts list your minor children as direct beneficiaries, these funds may be tied up in probate or controlled by a court-appointed conservator.
Avoid this by designating a trust as the beneficiary of these accounts to ensure the funds are managed according to your wishes and are available to actively benefit your children.
Overlooking Medical and Financial Decision-Making Authority
Most people plan their will or trust with the mindset that it becomes active when you die. If you become incapacitated (but are still alive), no one will have the legal authority to make decisions about your minor child’s healthcare or finances without explicit legal documents.
Avoid this by preparing a durable power of attorney and a medical directive to designate someone you trust to manage these responsibilities if you are unable to. Not only for yourself, but for your children.
Estate planning with minor children in mind requires a little forethought and active planning. We help you avoid these common mistake. When you’re ready to safeguard your children’s future and minimize complications, reach out to let us know. When you’re ready, we’re ready. Schedule a time to chat to get started.