We love our kids and would do nearly anything for them. We want to keep them safe and to provide for them. However, they can drive us absolutely crazy sometimes because they are prone to making terrible decisions. For example, when your pre-teen rang up a $300 bill making in-app purchases playing “Pokemon Go.” Or when your teen threw a ridiculous party the second you left town and caused thousands of dollars in damage to the home, The bottom line is: we love them, but they’re still kids and we don’t trust them yet.
If you are planning your estate, you should plan in accordance with what you know of your minor children: that they aren’t ready for everything you want to give them. In other words, you may want them to have cash, stocks, art, jewelry, real estate, and your life insurance benefits; however, you know that they will blow through all of it as quickly as possible when they turn eighteen. This is why you should consider establishing a testamentary trust for your minor child.
Characteristics of a Testamentary Trust
- A testamentary trust is a trust contained in a will, which takes effect when the testator passes away. So it can be adjusted as often as you update your will. You can even establish a separate testamentary trust for each child.
- You appoint a trustee, somebody whom you absolutely trust, to manage the trust and to carry out your wishes as to how your child receives distributions and assets.
- A testamentary trust can be used to distribute any assets you wish to leave to your child. This includes real and personal property, retirement accounts, life insurance benefits, etc.
- You can specify how and when your child will receive assets and set conditions that must be met. This is in contrast to your child receiving everything as soon as they turn eighteen. It is not uncommon for trusts to last until a child turns twenty-five years old, at which they will take control over their inherited assets. This is generally the age that young adults are seen to be more responsible. Other conditions may be that the child graduates college or gets married before the trust expires.
- There are tax benefits to putting assets into trust. The trust will be designated a Federal Tax Identification number and the assets will be taxed as an individual entity.
- Trusts continue to be under the supervision of probate courts, which creates a level of accountability that the trust is being adequately-managed.
- Since a testamentary trust is created as part of a will, it is not an extraordinarily expensive additional cost to establish one.
The Law Offices of Robert S. Thomas can help you plan your estate. My team and I understand and appreciate how important your children are to you. They are important to us as well, and we want to help you protect their future. I have assisted clients in estate planning for more than two decades and would love to serve you. Call us today at 847-392-5893 to set up an appointment, or visit our website to contact us.