At The Law Firm of Kavesh, Minor & Otis, Inc., our attorneys can help you address these important questions to secure your children’s best interests.
Single-parent families:
If you are a single parent, the surviving biological parent automatically becomes guardian, unless proven unfit. Without proper estate planning, that parent may manage the inheritance until your children turn 18, spending it down. If both you and the other parent are deceased and there are no legal plans in place, a judge will select guardians.
Blended families:
When the children in the household may be yours, mine and ours, how do you select the guardians? Should the minor children remain together, if possible? If not, then should you make legal arrangements to facilitate their ongoing contact? And how will each spouse’s assets be split between the children?
Traditional families:
For a traditional, nuclear family, the surviving parent remains the natural guardian. However, if both parents are deceased, will the maternal or paternal side of the family raise the children? Or perhaps you would rather want your children be reared by good friends in a stable marriage who share your values and lifestyle?
Setting Your Child Up For Success
You must take great care to protect any inheritance left to your children after you name a guardian, particularly if the guardians have children of their own. Your options include:
Outright distributions:
In the absence of any legal arrangements, the laws in most states will allow the outright distribution of an inheritance when the child turns 18. Following an outright distribution, the full inheritance may fall prey to divorces, lawsuits, bankruptcies or squandering. If you worked hard to accumulate your wealth, then you may want to protect any inheritance both for your children and from them.
Staggered distributions:
Although a bit more complex, this method holds the inheritance in trust until the child meets the terms that you set. Oftentimes, parents will designate multiple distributions upon a child’s reaching certain ages or earning education degrees. Regardless, at some identifiable point, the trust share of the child is terminated and the entire inheritance is distributed to them. Contrasted with the outright distribution method, this arrangement provides increased protection from the common threats described above.
Discretionary trusts:
This protects an inheritance both for and from your child, regardless of their age. You set the terms under which the inheritance is available. This discretionary trust may even own assets for the use and enjoyment of your child and their children for generations. When the trustee determines the beneficiary is capable of managing it on his or her own, then the inheritance may be transferred to a personal asset trust that the beneficiary controls and has access to but better protects the inheritance from common threats.
Personal Asset Trusts:
Once a child receives his or her inheritance under one of the above distribution methods, it can be placed in a trust that the child has control over and access to, but which provides significantly greater protection against losing the inheritance to spouses, divorce, lawsuit, creditors and other negative events. The Personal Asset Trust is a unique, ground-breaking feature of the Kavesh, Minor & Otis estate plan.
