Easy Mistakes to Avoid When Passing Assets to Your Children
Nov. 15, 2022
A children’ s trust is the best way to protect and provide for your little ones. By creating a trust properly, you ensure that your children have the resources they need when they need it. However, your carefully laid plans can be ruined by making one of these common mistakes.
Leaving Assets Outright to Kids
One of the worst things you can do is not create a trust at all for your children, which means that whatever you are leaving behind will go to your children outright, unprotected and directly to them when they turn 18. In addition, it also means that a Court will decide who handles these assets for your children before they turn 18, making it very likely that your assets will not be used in the way you want. Worst of all, if a professional Trustee is appointed, the costs of handling the assets could drain what’s left for your kids, quickly.
Not Carefully Choosing a Trustee
Even parents who do the right thing and set up a trust to hold what’s being left behind for their kids sometimes do not think carefully enough about the person they’re designating to be the Trustee. Being a trustee is being important because you are tasked with carefully managing the assets left for the children. Sometimes it is advantageous to designate more than one trustee to ensure the funds are well managed. Choosing more than one can provide some accountability for how the funds are used.
Not Properly Protecting Assets Left In Trust
Parents should consider whether distributing assets out of the trust directly to their children at specific ages or stages is the best plan for their family. Holding your assets in a flexible lifetime trust for the benefit of your children, will protect their inheritance from future divorces, creditors or accidental lawsuits.
Neglecting to Fix Beneficiary Designations
Lastly, make sure your insurance policies are directed to your trust and not directly to your children. This is a huge mistake we repeatedly see. Naming minors or even young adults as the beneficiaries of insurance and retirement accounts is a sure-fire way to ensure they are not used in the way you want and unnecessarily get stuck in a court process, which you can easily avoid.
Our Office Can Help
A trust can both provide for and protect your children after your death, as well as ensure you are cared for the way you want in the event of your incapacity. If you’re ready to set up an effective plan for your family’s well-being and care, start by sitting down with us. We will help you protect, preserve and enhance what matters most. Click here to Schedule a FREE Virtual Estate Planning Session. We will guide you through the entire process and help you understand what needs to be done to ensure your loved ones are taken care of.
Encourage family time. The greatest untapped resource available for improving the lives of our children is time with their parents. Kids with engaged parents do better in school, problem-solve more successfully, and generally cope better with whatever life throws at them.