It is imperative that parents with minor children have estate plans. At a bare minimum,

parents need to name healthcare surrogates to make medical decisions for their children until the

parents can get to the hospital, and parents also need to name guardians for their children if the

parents are both gone. Parents should also consider including a Revocable Trust as part of their

estate plan.

So what is it about having children that makes a Revocable Trust a good solution if

parents die earlier than they would like?

The first reason is that without a Revocable Trust, the child generally has full access to

all of the inherited funds at age 18. How many 18-year-olds do you know that would spend a

lump sum inheritance wisely? With a Revocable Trust, parents can protect the child against

extravagant spending sprees that often occur if a child inherits funds at a young age. With a

Revocable Trust, parents can provide financially for their child while placing limitations on lump

sum distributions. These limitations could include the child reaching a certain age(s) or reaching

a certain milestone(s) that the parents believe indicate the child’s readiness to make responsible

decisions.

Additionally, if parents do not have a properly funded Revocable Trust, a probate will be

needed to transfer the parents’ assets to the child. If a minor receives an inheritance of more than

$15,000 through probate, Florida law requires that a court appoint a financial guardian to look

after the assets for the child. The financial guardian is in place until the child is 18 and must file

detailed reports with the court every year – a time-consuming, and sometimes costly, burden.

And again, the child receives the remainder of the assets upon turning 18.

While a Revocable Trust does not protect the assets of the person who creates it from that

person’s creditors, when done correctly, a Revocable Trust can protect the assets held in that

trust from some of the child’s creditors and a child’s angry spouse.

Finally, a Revocable Trust can also be set up to limit the distribution of funds in the

unfortunate case of a child having a substance abuse problem.

For all of these reasons, parents should think carefully about using a Revocable Trust to

protect their child after the parents are gone. Even if parents do not choose to set up a Revocable

Trust, they should at least have papers designating a healthcare surrogate and guardian for their

child.

If you know someone who could benefit from a Revocable Trust and other estate

planning documents, please share this article with them.

Lorien Smith Johnson, Esq.

Estate Planning and Probate Attorney

LSJohnson@LorienSJohnson.com

I often get questions about the need for an attorney when there are free online templates for wills and other estate planning documents.  Of course, it is cheaper to use these templates, but what are you giving up, and what problems might you be causing for your family?

Using one of these online forms may not be the best approach for you.  Lawyers are trained to ask questions to identify the documents needed to meet your goals.  For example, not everyone needs a trust in addition to a will, but if you have children, that may be the best way to go.  Do you really want your children inheriting everything when they turn 18 and may not handle money very well?  “Cool, now I can afford that nice car that mom and dad wouldn’t let me buy.”

 Also, it is easy for individuals to make mistakes on the documents from the web.  I have seen two cases in which the wills may not be valid because the person made a mistake in completing them.  If the court rules that these wills are not valid, a whole different group will be receiving the deceased person’s assets.  Don’t you want to make sure that your assets are given to the people you want to get them?  If a will isn’t valid, the good state of Florida says who gets your assets, and that may not be what you wanted to happen. 

 The money you spend on a lawyer will likely save your family time and money when the time comes that these documents are needed. 

The Bottom Line:

If you want an estate plan that is going to work for your family when it is needed, consult a lawyer with the education, knowledge, and experience to counsel you and draft the documents that suit your needs.  Your family is worth it, don’t you agree?

While a trust is an often touted part of estate planning, not everyone needs a trust.  So who does need a Trust?  Today we will look at one category of people who need a trust – people with children, especially minor children.  So what about having children makes a trust the best solution to estate planning needs?  There are actually several reasons.

The first is protection against extravagant spending sprees if the child inherits the funds at a young age.  Without a trust, the child generally has full access to the inherited funds at age 18.  How many 18 year olds can be expected to spend funds wisely?

Additionally, if a minor receives an inheritance of more than $15,000, Florida law requires a court-appointed guardian to look after the assets for the child.  The guardian is in place until the child is 18 and must file reports with the court every year – a time-consuming burden which can deplete the child’s assets depending on who is appointed guardian.  And again, the child receives the remainder of the assets upon turning 18. 

Which leads to a reason a trust is important when you have children of any age.  While a basic trust does not protect your assets from your creditors, when done correctly, a trust can protect your child’s trust assets from your child’s creditors, angry spouses, or plaintiffs in a law suit.  This protection comes from the use of the simple word “may.”  Worded correctly, the trust says the child may take a certain amount after reaching a certain point – generally an age set by the parent.  The “may take” language allows the child to choose not to take the distribution of the assets.  If the child does not take the assets, then the assets legally do not belong to the child.  Therefore, these assets are protected if the child is involved in bankruptcy, an ugly divorce, or a law suit.  The bankruptcy trustee, soon-to-be ex-spouse, or plaintiff cannot get at those assets because the assets do not belong to your child until the child chooses to take the assets out of the trust.

Finally, a trust can also be set up to limit or withhold funds in the unfortunate case of the child having a substance abuse problem.

For all of these reasons, parents should think carefully about using a trust to protect their children after they are gone. 

If you have any questions on this article or other aspects of estate planning, please feel free to contact your favorite estate planning attorney or give me a call at 813-758-3492 or e-mail me at LSJohnson@LorienSJohnson.com. 

Disclaimer: This website contains general information directed to Florida residents. This firm does not intend to give legal advice through its pages and/or blog. If you need legal advice, we encourage you to find an attorney licensed in your state. This language on this website does not create an attorney-client relationship between you and this firm.