Creating a comprehensive estate plan is an important step for any adult. For parents of young children, that step becomes even more vital. One reason estate planning is so crucial for parents is that minor children are legally unable to manage inherited property. This means someone must be selected to protect and manage the assets you intend to leave to your child. Toward that end, the Los Angeles attorneys at Schomer Law Group, APC talk about who should be responsible for protecting your child’s inheritance.
Why a Will May Not Be Enough
Most people think of a Last Will and Testament as the natural way to distribute assets after death. While a Will can be an effective estate planning tool, it may not be the ideal way to leave an inheritance to a minor child. Under California law, children under the age of 18 cannot legally own or manage property. If you name a minor child as a beneficiary in your Will, a judge must appoint an adult to manage the assets until the child reaches legal age. You will have no control over who the court chooses or how that person manages your child’s inheritance.
To avoid court intervention, and to maintain control over how and when your child receives inherited assets, many parents choose to establish a trust. A trust allows you to put a plan in place that designates someone you trust to oversee your child’s inheritance on your terms.
Understanding How a Trust Works
A trust is a legal arrangement that gives one person (the Trustee) authority to manage property for the benefit of another person (the beneficiary). As the creator of the trust, you are known as the Settlor or Grantor. You will transfer assets into the trust and appoint a Trustee to handle those assets in accordance with the terms you set.
Trusts can be revocable or irrevocable and may take effect during your lifetime (a living trust) or be created through your Will after your death (a testamentary trust). For parents of young children, a living trust is often the preferred choice because it allows the Trustee to step in immediately if you become incapacitated or pass away. You can spell out how and when your child will receive funds, and you can place limits or guidelines to ensure those funds are used in a responsible way.
Choosing the Right Trustee to Manage a Child’s Inheritance
The Trustee you appoint will play a central role in managing your child’s inheritance, which makes selecting the right person critical. Consider the following when making your decision:
- Skills and Experience: Being a Trustee is not a ceremonial role. The person must understand how to manage finances, follow legal requirements, and communicate effectively with beneficiaries. While it may seem natural to name your spouse, a sibling, or a close friend, it is important to assess whether that individual is truly equipped to handle the legal and financial duties of the role. If not, naming a professional fiduciary or corporate Trustee may be the best course of action.
- Commitment to Following Your Wishes: Even though your Trustee must follow the instructions in the trust, many trusts allow the Trustee some discretion. This means the person must be prepared to make decisions based on your goals and values, even in situations that may not be spelled out in detail. Choose someone who you trust to respect your intentions and act in your child’s best interest.
- Objectivity and Lack of Conflicts: It is often helpful to appoint someone who is removed from family dynamics that could lead to disagreements or disputes. For example, if your Trustee is also a potential guardian or has a financial interest in the estate, that could present a conflict. A neutral Trustee, such as a financial institution or professional fiduciary, can provide objectivity and ensure fair administration.
- Willingness to Accept the Responsibility: Being a Trustee can be time-consuming and emotionally challenging, especially after the loss of a loved one. Before naming someone in your estate plan, speak with them directly. Make sure they understand the responsibilities involved and are comfortable accepting the role.
It is impossible to predict exactly what your child’s needs will be in the years to come. That is why careful estate planning is essential. By creating a trust and selecting the right Trustee, you retain control over how your assets will be managed and distributed for your child’s benefit.
Do You Need Help Protecting Your Child’s Inheritance?
For more information, please join us for an upcoming FREE seminar. If you would like help protecting your child’s inheritance in California, contact the experienced Los Angeles estate planning attorneys at Schomer Law Group APCby calling (310) 337-7696 to schedule an appointment.
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