It’s always important to provide for your family. This can be especially so when you have minor children. The current pandemic is an unfortunate reminder that the unforeseen can play a huge role in our lives. With everything up in the air surrounding Covid-19 and its effects, it is important to have a degree of peace of mind for your family. An up-to-date estate plan can certainly help add to your peace of mind in this tumultuous time.
Many people unfortunately look at estate planning as simply making plans for after your death. The trouble with an issue such as Covid is that there could come a time when you are still living but unable to take care for your minor children or yourself. This incapacity can cause real issues and steps should be taken to ensure that it doesn’t play havoc on your family.
Financial needs
A revocable living trust (RLT) is typically a highly effective way to help manage financial needs for your minor child(ren) and yourself in case you become incapacitated. An RLT allows you to name yourself as Trustee, thus allowing you to continue having control of any property and money you transfer into the trust. You simply change legal ownership of the property and accounts from you as an individual to you as trustee. You can also name any alternate trustee or co-trustee who may be able to step in without the involvement of the courts. They can then manage the property and monies for the benefit of your minor children and for your own benefit if you become to sick to be able to handle it yourself.
The other benefit to using a trust such as this is that you can specify how and when any funds may be used for the benefit of your minor child or children. This includes giving instruction on which expenses should be paid during your incapacitation so that your minor child is still provided for the same as you would be doing were you not incapacitated. You can also make plans on how the money will be used or distributed in the event of your death. For example, you could stipulate that your minor child would get a certain percentage paid out when they hit a specific age with the rest paid out after they hit another age. You can also set certain stipulations and requirements such as stating that your minor child will only receive payout after they finish school, complete a period of sobriety, or other such requirement. You could also decide to leave the details of how and when to distribute up to the trustee. This sort of trust is usually referred to as a discretionary trust.
Since your child is not guaranteed to receive a specific amount or certain property, the funds can be protected from future creditors or from a divorcing spouse. It is very important though to choose a trustee who can be relied upon to handle your monies and properties in a manner of which you would approve. Given that you choose not only the trustee but how the money is to be handled and spent, it can offer the peace of knowing that a former partner or a family member of whom you don’t approve will not be able to spend your minor child’s funds, even if they end up raising them.
Please be sure to check out part 2 of our article by clicking here
