Key Estate Planning Considerations for Parents

What Tools Are Most Important for Parents With Minor Children?

Estate planning for young parents is crucial in case one or both die or become incapacitated to ensure their children are properly cared for. A Will is an important tool because it allows parents to nominate a person as guardian of their minor children’s person and property. For a non-parent to be appointed as a minor’s guardian, both parents must be deceased or lack capacity and must be appointed by a Surrogate’s Court. To avoid court intervention over property inherited by a minor, a parent can establish a trust which names a trustee who can manage property for the benefit of children until adulthood or a specified age.

Key Considerations for Parents With Adult Children

The stakes might seem lower for parents with adult children, but adulthood brings its own challenges. Parents need to consider whether it is best for their children to inherit outright or in a subtrust. If an adult child inherits outright, that inheritance may disqualify them from government benefits, will become subject to creditors, or may impact their taxable estate.

Parents of children with developmental or intellectual disabilities are often tasked with estate planning for themselves and their children. For adult children with disabilities, the best medium through which they can inherit is a Supplemental Needs Trust, which allows them to have access to funds without jeopardizing their government benefit eligibility.

Even for adult children who do not have special needs, a trust structure can be beneficial. We often refer to this as a “descendants trust.” By utilizing a descendants’ trust, you can avoid estate tax in successive generations. Generally speaking, a descendant’s trust gives creditor protection to heirs, protecting their inheritance from dissipation in the event of a divorce, bad business decisions, or any other creditors.

The trust can be drafted as liberally or restrictively as the situation commands. If serving as their own trustee, descendants trust beneficiaries can distribute to themselves for health, education, maintenance, and support. If a distribution is needed for any other reason, an independent trustee can be appointed to make distributions for any purpose, even to the point of terminating the entire trust, if so desired. The individual provisions can be custom tailored to beneficiaries’ needs and lifestyle, as well as your wishes and consideration.

When Children Inherit Is Just as Important as How

For all parents who are married, they should consider when they want their children to inherit. This can be complicated if there is a second marriage involved. Regardless, a parent should consider if they want their children to inherit after the parent and their spouse are both deceased so the survivor can use the deceased spouse’s assets to maintain their lifestyle. Or, they may want the children to inherit immediately after the parent’s death, even if there is a surviving spouse.

Facing mortality or incapacity is difficult, but having candid, honest conversations with one’s family and estate planning attorney provides invaluable peace of mind.