PARENTS WITH YOUNG CHILDREN, BEWARE! REVOCABLE LIVING TRUSTS TO TAKE CARE OF MINOR CHILDREN

 Many families with young children think they are too young to have a trust or that they don’t own enough for a trust.  However, here is a true story showing that nothing could be further from the truth!

A few years ago, a young mother became an instant widow.  Her husband died in an automobile accident.  The husband had left life insurance, naming his minor son as beneficiary.  So, not only did the young woman have to raise her son alone, but she had to go to court to be appointed guardian over the young son’s assets.  This restricted her ability to use the assets, required her to account for every penny of the assets each year, and required her to pay court costs and attorney’s fees to do so.

Then, when the son reached age seventeen (17), he got into an argument with his mother and left.  He moved out because he knew that he would be getting his inheritance within a year.  Kids instinctively separate from parents in the early teen years, as any of us with teenagers can attest!  The main leverage parents have to continue to encourage children is financial.  Ordinarily, children are willing to stay with their parents until they have acquired the skills they need to go out and make their own way.  However, when the financial balance is upset, children may be harmed by the assets they acquire.

Preventing children from receiving assets at eighteen (18), creating certainty in who will raise the children, and responsibly providing for them are goals that using a Revocable living trust for your planning can achieve.  How much better would it have been for the family if the life insurance proceeds were left in trust for the child, with the mother appointed as trustee and able to use her discretion to invest and spend the money to raise the child without court supervision.

There are many aspects to family dynamics that come into play during the estate planning process.  This is but one example.  But it’s a good one!