ESTATE PLANNING IN FLORIDA TO PROTECT CHILDREN

Many parents purchase life insurance, sign a will, or prepare a trust to ensure the well-being of their children.  Unfortunately, most life insurance proceeds are left outright to children and other beneficiaries without a single word of instruction.

 Minor children cannot own property.  Leaving life insurance proceeds or any other kind of property to minors is an exercise in futility.  To do so is to ensure that a guardianship must be established and to leave it to the control of the probate court, under whose supervision it will stay for each year that each child remains a minor.  This is not proper estate planning.

 So what do most parents intend for their children when they begin estate planning?  Typically they have raised their children through care and love for them; not by simply giving them large sums of money.

 Most would like money and property to pass to those same children with a few instructions and perhaps some guidance.  Also, very few people raise their children by dispersing household funds with precise equality among their little ones.

 Although most love their children equally, they care for them in terms of their needs.  If one child needs new shoes, most parents will not disburse an equal amount of cash to the rest of the children who do not need shoes!  Most families don’t keep a spending tally sheet.

 When preparing an estate plan, many clients continue to have the same goal; to ensure that children receive what they need when they need it.  However, too many wills and trusts have pages and pages of legalese - providing little guidance for guardians who may be caring for those minors upon the parents’ death.

 The Common Trust

 Clients can still accomplish their goals by creating a Common Trust for all their children as part of the estate plan.  A Common Trust enables children to receive whatever they need for their health, maintenance, and education until all of them are adults.  When that time comes, whatever is left can be divided equally (or however the client desires) among each of the children.

 If there is a significant spread in the children’s ages and the client is concerned that adult children will have to wait too long for their inheritance, they can instruct their trustee to advance money to the mature children for such life goals as establishing a business or buying a home, as long as the disbursements are not harmful to the basic well-being of the younger brothers and sisters.

 You can even stipulate that these advances are to be treated like interest-free loans.  In this way, when the youngest child reaches adulthood, all of the children’s shares will be more equal.

 The Common Trust for children does not have to end when the youngest child becomes an adult.  It can end at any time the client desires.  For example, you could specify that it will end when the youngest child is 23 years old or when he or she finishes college, or whichever of those two events happens first.

 INDIVIDUAL TRUST SHARES

 Even after the children reach adulthood and the Common Trust ends, clients can still control the property for the protection of their loved ones.  For example, you could divide the remaining inheritance into shares that are placed into separate trusts for each child.

 The instructions for each separate trust can be as varied as the client would like.  The client can provide that a child receive whatever he or she wants, whenever he or she wants it.  Or you can provide that a child receive only the income the trust earns.  The only limit to these instructions is your imagination.

 Different children often require different estate planning; all children need some planning.  You can stipulate that your children are to receive their inheritances at different times or at different ages.  You can also determine how they will receive their funds.

 For example, you might instruct that the children are to receive their funds only for specific items as they are needed; or that they are to receive their funds in two, three, four, or more distributions separated by any number of years you prefer.  Many clients find it beneficial to leave the proceeds in trust for the life of the children, allowing the children to take funds out only when they need to.  Similar to a marital trust, the money and property inside the children’s separate trusts can be protected from the child’s creditors.

 Parents also can establish a special distribution pattern for each child.  The disbursements do not have to be made in the same way for all children.  For example, a child can even be protected from himself or herself if they are a spendthrift or have a substance abuse problem.

 Protective trusts can be established for children with special needs, so that their inheritance can be used to provide additional care for them, without jeopardizing government assistance they may be receiving. 

 Unfortunately, most people don’t plan for their adult children; they just give them their inheritances outright.  This very natural choice can be a mistake.  Parents may say, “I don’t want to attach strings,” or “I don’t want to control from the grave.”

 However, if most children understood the protections that can be provided for their inheritance, those children would beg their parents to use separate trust planning!  They would request a trust, not resent it, if just for the creditor protection opportunities alone!