What is the best way to leave assets to minor children? Well, that depends on the testator’s intentions and risk level, but there are a few options and basics to keep in mind:
In Illinois, children under age 18 may inherit property, but can’t enter contracts and manage it. To leave minor children property, parents may consider a family trust or separate trusts for each child.
The trusts typically used for estate planning purposes include a Living Trust, also known as a Revocable Trust, with an estate plan designed to be amendable during the grantor’s life; a Testamentary Trust, which is contained in a will and springs into effect upon the grantor’s death; and a Special Needs Trust, a trust created to ensure that a disabled family member will not be cut off from government benefits such as Social Security Disability and Medicaid in the event of the grantor’s death.
With the Revocable/Living Trust, grantors typically name themselves as the trustee, retaining control of the assets during their lifetime. While this trust can be changed at any time during a grantor’s life, upon the grantor’s death, it becomes irrevocable and the trust assets may be immediately distributed by the-then successor trustee to the named beneficiaries, including children, or held back with distributions over time pursuant to the instructions of the grantor.
Testamentary trusts, drafted within the body of a will, are also used to preserve assets until children reach the age of majority. With testamentary trusts, however, an executor must probate the will, i.e. open a court case and administer the probate estate pursuant to state law, in order to administer the trust. Separate testamentary trusts within the will can address different assets and multiple beneficiaries. A trust for a minor child, with a trusted friend or relative named to manage it, can restrict the use and distribution of the assets so that they may be used for the child and his or her health, education, welfare, etc.
Separate trusts also can be crafted within revocable trusts to allow children to receive money in installments, specifying allotments when the child reaches specific ages. This allows heirs access to some money early on, but disburses the money over a period years so as to hopefully help the heir along the way.
Another trust option is a college-incentive provision, where disbursement to under-age beneficiaries can be made contingent on their attainment of a bachelor’s degree from a college or university, combined with age requirements, such as providing a beneficiary with a payout when degree is achieved.
These are just a few examples. Revocable trusts are pliable and the drafting possibilities endless. If you are ready to complete, update, or review your estate plan, contact us today.