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Alexandria, VA Estate Planning Blog

Monday, March 26, 2012

Trusts for Children

Trust for Children; Because your child is the most important Asset 

 

Trusts for Children Defined: protects children by using the child's inheritance to give each child the best chance of personal and financial success.

 

Trusts for Children; Most Important Estate Planning Issue

Its simple and inexpensive to create trusts for children. For a parent of a young child, its the number one reason to estate plan. Sadly, many attorneys fail to advise clients to create trusts for children.

 

Trusts for Children; Why?

Trusts for children are trusts designed to address the likely catastrophe if a child's parent dies. When a parent dies, or both parents, the child experiences a terrible lifelong loss of love and resources. Additionally the child looses the crucial rearing influence that helps form their moral compass and directs them towards a more prosperous path. The child's formative years, which should have been guided by a parent, are now guided by friends and popular culture. Deep feelings of sorrow, pain and injustice further aggravates the problem. 

 

Trusts for Children; Purpose

The purpose of trusts for children is to give the child the best chance of personal and professional success. Trusts for children use the decedent's financial resources (e.g., life insurance) as a tool to influence the conduct of the child and ensure that the named caregivers (there should be many named) have sufficient assets to care for the child. Trusts for children are designed to protect an immature child from the destructive influence of receiving a large amount of money while simultaneously protecting the assets from caretaker abuse and creditors.

 

Trusts for Children; Trust Provisions

Trusts for children should be designed to contain trust provisions designed to rear the child in a parental fashion. Trusts for children frequently have the following provisions;

  • to protect assets from immature beneficiaries (child gets management control as trustee at a certain age; e.g. 30)
  • to promote conduct (pay for college, higher education, trade-school, ect
  • to inhibit conduct (stop all or certain payments if child joins a cult, develops a drug problem, abuses drugs)
  • to provide positive assistance for life events (pay for a wedding, buy a first car, start a business)
  • to protect the trust assets from a caregiver wasting trust assets
  • to support the caregiver financially (caregiver will have great financial and personal responsibility)

 

Trusts for Children: Multiple Children & Giving

Trusts for children may be established for one or more children. Sometimes creating trusts for multiple children can be more effective and flexible than trusts for one child. During life, parents give to their child based on need. However they immediately assume that upon death that each child should get an equal share. However I believe the best solutions is a hybrid-solution. While the child is dependent (young, going to college or disabled), consider giving based on need (equitably). When that disability is lifted, consider distributing the remainder more equally. 

 

Trusts for Children: Cost Effective & Efficient

Trusts for children are not terribly expensive. Estate planning fees are generally based on expectations of attorney time. The parent is best suited to determine what trust provisions to include. If the attorney properly involves the parent in planning, and efficiently collects information, than the estate planning fees should be significantly reduced. 

 

Trusts for Children: Collecting Information

We collect asset information from the parent via an Estate Planning Worksheet. We help the client select caregivers during a conference. We present the client with a trust Provision Template for their trust for children and allow them to modify and craft the provisions for their child’s care and wellbeing. 

 

Trust for Children: Selecting Trustees & Caregivers

Trusts for children frequently have caregivers who also serve as trustee. Our position is that while that may work, its generally not preferable. Consider separating the duties of caregiver and trustee in your trust for children. When selecting a caregiver or trustee, the client has much to consider. What make a good candidate for a caregiver may not necessarily be the case for a Trustee. Additionally, by separating the money supply from the caregiver, you can both comfortably provide for the caregiver and protect the trust assets from caregiver abuse. 

 

Trusts for Children: Grandparents & Extended Families Roles

Trust for children can be created by grandparents and extended family. Consider notifying every person who may likely name you or your child as their beneficiary that you have created a trust for children. By having said person name your trust for children as beneficiary (as opposed to your child), than the money can be directed to the trust for the reasons identified above (as opposed to going directly to the child). 

 

Trusts for Children; Not just for the rich

 

Trust for children are not exclusively for the rich. Anybody who has a young child should consider creating a trust for children. Anybody with young children should have life insurance (insuring your future wealth) to provide a security net for your family. Most young people can easily purchase a life insurance policy sufficient to fund the trust for children. Of course, the more assets the parent has, the more necessary the trust for children becomes for a young parent.

 

Trusts for Children: Getting Started

Trusts for Children are very important estate planning devices. It is easy to get started on your own trust for children. Review some of the paperwork we have provided and give us a call. We are happy to discuss establishing your own trust for children.

 

CALL TODAY FOR MORE INFORMATION


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The Lenzi Law Firm, PLLC assists clients throughout Northern Virginia and Washington D.C. including Fort Washington, Falls Church, Ft. Myer, Vienna, Rosslyn, Springfield, Mount Vernon, Annandale, Fort Belvoir, Fairfax, Dunn Loring, Merrifield, McLean, Oakton, Reston, Burke, Great Falls, Fredericksburg, Stafford and Herndon in Arlington County, Alexandria County, & Fairfax County.



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