Estate Planning for Parents of Minor Children
Estate planning is a dynamic process. Each person has their own circumstances that make the outline and structure of estate planning unique to them.
For parents with minor children, the focal point of estate planning generally is preparation for the contingency of simultaneous death or both parents dying while the children are young. The estate planning focus is the care and preservation of their children during the stages of life from infancy to post college adulthood.
Estate planning for parents of minor children involves the creation of a Living Trust Instrument so that, upon the death of both parents, if the children are minors, the deceased parents assets will be directed to providing for the children’s welfare throughout the different stages of their lives. The following estate planning stages have been provided to provide guidance.
Estate Planning: Infant to College Stage #1
During the estate planning stage where the minor children are infants, the estate planing would designate multiple tiers of guardians of the child’s person (caretakers with sole custody) and trustees (managers of the Trust assets). The guardian and the trustee may be the same person, but doesn’t have to be. The Trust funds may be used to provide for the following:
health needs
education,
social development, and
support needs.
In addition, the estate plan may provide for the distribution and payment of Trust funds to minimize the financial burden on the guardian and to promote harmony in the immediate family of the guardian (i.e., yearly trip to Nags Head or purchase of a van).
Estate Planning: College Years Stage #2
During the estate planning stage where the children are no longer minors, but still in college/ trade school or earning an advanced degree, the estate plan would be directed towards using the Trust funds to provide financial relief during college.
However, because the children will have grown up with the disadvantage of not having their parents for guidance, the Trust also should be used to influence the children’s conduct. Trust assets may be used to promote conduct (distributions made to promote positive conduct such as community activism, advanced education studies, ect.) and Trust assets may be used to inhibit conduct (distributions withheld if the child is addicted to drugs, doing poorly in school, involved in a non-traditional cult. ect.).
The idea is that, at one of the most critical times in the children’s lives, with no parental guidance, the Trust funds funds can be used to increase the likelihood of success.
In addition, the estate plan may be used to pay for mile stone events and other distribution. For example, the child’s parents may want to pay for their daughter’s wedding, send the children abroad for studies, pay for safe housing, or pay for tutoring.
Estate Planning: Post College Years Stage #3
After the children have graduated college, they still may not be prepared to manage money. In a sense, they are still spendthrift. Consequently, it may be prudent to delay the final distribution to the children until 3-5 years after they have graduated college/ trade school or advanced degree. When making a final distribution, or staggered distributions, parents may decide to have the assets asset protected from the children’s future creditors, divorcing spouse’s, bankruptcy and Medicaid.