I’d like to leave something to my grandchildren, many of whom are currently small babies. Should I create a trust on their behalf?
When it comes to leaving significant assets to minors, creating a trust on their behalf is usually the most secure way to ensure the assets are protected and the children are able to benefit from their inheritance when the time comes. When a minor inherits money or assets, these bequests are almost always kept in trust whether the estate plan so directs or not. By preplanning the terms of the trust, however, the testator can ensure the proper trustees are selected and any desired conditions are contained within the terms of the trust. Moreover, the testator can rest assured knowing that the assets will be carefully and prudently handled by a trusted relative or institution. This is one of the most important components of a comprehensive estate plan.
Children’s trusts can come in a variety of formats. One of the most common types of children’s trusts is the basic Individual Child’s Trust. As the name suggests, this arrangement creates a separate trust for each minor child named in the estate plan. The trust creator is able to attach conditions unique to each child, and may include different directives depending on the child’s needs and proclivities.
A Children’s Pot Trust is an alternative format that creates a single trust for the benefit of multiple children. In some scenarios, this can help ensure a more equal and even-handed distribution of assets, ensuring that children have equal access to the funds regardless of their age and/or station in life. In most cases, the pot trust is terminated once the youngest beneficiary reaches age 18, and the remaining assets are then distributed equally amongst all beneficiaries – a format which is favored by some families in certain scenarios.
If you are considering setting up a trust on behalf of a minor, there are a number of factors and criteria to consider along the way. It is always wise to work with a reputable, experienced estate planning attorney to ensure that your assets are distributed according to your specific wishes.