Life is full of unpredictable circumstances. As parents, it’s vital to protect the people we love the most – our children – in case of any situation. We all want our kids to live a life full of joy, happiness, and of course financial security. While living in a complex, unpredictable world, the greatest gift you can leave your children is a safety net otherwise known as a living will or a trust.
You may have commonly heard of the term “trust fund” in movies and TV shows, but they never seem to discuss the details. It’s a secure legal document to set your kids up properly for whatever may happen.
What is a living will? In most states, a will is a document that has clear directions on who will inherit your assets such as: bank accounts, real estate, cars, family heirlooms, and other valuable property after a loved one passes. If you were to create a will, it can be drafted to be as unique as the person who it’s created for. Within a will you can leave any of your worldly possessions to anyone you want, hence the word will. It’s your will to do with your things!
Why does my family need a living will? Living wills allow you to have even more specifications connected to your children, parents, partners and even charities. Living wills can even determine how your beneficiaries handle your personal medical decisions should you become incapable of making them yourself. For parents making living a will, it becomes extremely important for you to ensure your child’s safety and security.
The well-being of our family is at the top of the list on your living well! In the case of the most unfortunate situation, your death will give you the power to say who you feel is best to be your child’s future guardian.
“If you have minor-aged children at home, it’s important to have a will that appoints guardianship of your children. If a guardian is not appointed at the time of death, your surviving family will have to seek help in a probate court to have a guardian appointed for your children. The person appointed may not be one whom you would have wanted to be entrusted with your kids.” Investopedia
More About Living Wills and Trusts…
Due to their very nature, these areas of estate planning can be as serious as they are emotional. Discussing these difficult “what if’s” can be challenging; however, it is important to acknowledge that should the worst arise, you and your family have a plan in place. This eliminates needing to make last minute emotionally-driven decisions.
Here is a list of things to be planned within a Living Will:
- Limiting estate taxes by setting up trust accounts in the name of beneficiaries
- Establishing a guardian for living dependents
- Naming an executor of the estate to oversee the terms of the will
- Creating/updating beneficiaries on plans such as life insurance, IRAs and 401(k)s
- Setting up funeral arrangements
- Establishing annual gifting to qualified charitable and non-profit organizations to reduce the taxable estate
- Setting up a (POA) to direct other assets and investments
There’s a difference between a living will vs. a trust so we need to make sure this is clear. The difference between a will and a trust lies within the cost and protection of assets. Trusts can offer more control over your assets, but are more expensive, can be far more difficult than a will to set up. They also have to be actively managed. A will (also called a testamentary will) is a legally enforceable document stating how you want to distribute all your assets after your death.
“Many people choose to have either a trust or a will. However, others may actually include a trust within a will. This is often referred to as a testamentary trust. This type of trust does not go into effect until the testator’s death. Other trusts are set up during the lifetime of the person making it. There are important things to understand about a trust of this nature.” HG
What does a trust cover?
The details of trust can cover a wide range of things. Each trust formatted for the needs of the trustee. If you want your child to be able to go to college and not have to worry about how they’ll be able to afford it, there can be a section drawn out by your attorney specifically for your child’s education. “Trust funds can hold lots of kinds of property, from cash to investments to real estate to artwork. They can even hold whole businesses in them. Basically anything that is valuable can go in a trust fund.” Fabric
Some families choose to leave strict requirements within a trust, for example: our child can’t touch any left over money from their college fund until completing their Bachelor’s degree. Other things covered within a trust can range from age limitations and monthly/yearly allowances associated with said trust. If you believe your child won’t be fully mature until 21 or older, you can apply this to the trust and they will be required to use their power of attorney or appointed guardian(s) to gain access to their inheritance.
What is a trust fund?
“A trust fund can be a useful component of your estate planning, (in addition to writing your last will and testament and picking your children’s guardians). That’s especially true if you want to help your money get to your kids without a hitch when you pass away.” When a person says they have a trust fund there is sometimes an in warranted stigma of this person must be spoiled, rich or very entitled. Nothing could be further from the truth! People of all financial status can set up a trust fund for their children.“The exciting part about trust funds is that they are flexible enough to meet your individual needs, even if you don’t consider yourself “rich.” Forbes
A trust fund is a financial account with a set amount of “requirements” for the person(s) set to inherit it. “Putting money in a trust lets you pass property to someone in a structured way, where you can impose rules. For example, you might say that your beneficiary can’t use these funds to pay off debt. Or, you might impose rules on how old the beneficiary needs to be before she gains control over the money.” Fabric
To create a trust fund, you’ll need the following information:
- Trustor’s name
- Name of the trust
- Description of the trust, namely why the trustor is creating it
- Trustee name plus any directions about replacing a trustee if he or she can no longer serve
- Beneficiary name
- List of property owned by the trust fund
- Duties and abilities of the trustee (for example, whether the trustee can buy or sell property contained in the trust or how the process works if the trustee wants to resign or transfer responsibilities to someone else)
- Details on what should happen if the trustor, trustee or beneficiaries passed away or became incapacitated
There are several roles involved in creating a trust…
Forbes shares: “First, because a trust is a legal contract, you’ll need a lawyer to set it up for you. Also, remember there are three key parties that comprise a trust fund:
1. A grantor, or the person who sets up a trust and has the assists to give.
2. A beneficiary, or the person chosen to receive the trust fund assets.
3. A trustee, or the person charged with managing the assets in the trust.”
What age should I start planning a trust fund for my child?
Any age is the right age for your child to be financial protected by your will! Some testators start the process before they even have children. These legal documents are some of the most important acts of security a parent can leave a child. It will also ease your mind to know that if anything were to happen your precious children would be okay. That type of peace of mind is priceless.
Can I choose a power of attorney for my child if they’re underage when I pass?
A power of attorney is helpful for living wills as well as trust funds. God forbid you are injured severely and cant make legal, financial or choices that will affect your children. A custodian will be named inside of your will to step in and step up with the protection of your family. This person(s) will guide the minors through all the challenges that may arise. A power of attorney can be an attorney such as Ben Weaver or a trusted family member that works with your attorney to make choices that are aligned with your existing will.
Responsible for assigning an individual, known as the “attorney in fact”, who can make financial decisions for you, should you be incapacitated. When financial challenges, bills need paying, investments need managing or assets need to be sold, this document will allow the attorney in fact to act on your behalf. Learn more about creating an estate plan with Ben Weaver!
How can I ensure my children’s finances are protected in case I pass before they are 18?
As previously stated, a power of attorney can help to protect your child’s financial future. Also having a trustworthy attorney on your side like Ben Weaver draft an impenetrable trust fund with special outlines of how you want your money spent on your minor children.
Can I make specific investments and arrangements in my will for the kids?
For example, declaring a rule “this money is specifically for you going to college or when you purchase your first home”. Within a will or trust specific arrangements can be made for your children. You can even say how you want the money to be spent if it’s a trust and when they have full access to it.
Can I retain Ben Weaver as my child’s attorney for when I pass?
Yes! Ben has a great deal of estate planning experience. He will be more than ready to help you start the process of creating your living will and trust for your children. “Individuals who would like to draft a testamentary trust may wish to contact an experienced estate planning lawyer. He or she can explain the advantages and disadvantages of this estate planning tool. He or she can draft a testamentary trust and a will if this is what you decide to do and if he or she agrees with this approach. If you have an existing testamentary trust or will, he or she can review these documents for you and explain if any changes are necessary.”
Please do not try to create a will or trust on your own…
Like most DIY’s, if you don’t have the proper tools for the project at hand, your desired outcome may not turn out the way you imagined it. The internet is filled with DIY legal documents that aren’t complete with the right documents you need to create a proper Living Will or Trust Fund. We highly recommend you avoid attempting to draft your own will and trust without the aid of an attorney! The smallest mistakes could endanger your family’s financial well being!
“For some people with complicated personal and financial lives, today’s complexities may not be fully addressed with a do-it-yourself service for wills and trusts. While many of us would prefer to fill in the blanks in silence than have to talk to anyone about our doubts or concerns, sometimes it helps — a lot — to get professional advice.” Forbes
Having children is one of the many joys of life – and it also can complicate life in many interesting ways…estate planning is no exception! Are you a new parent? Young parents don’t need anything fancy, but there are a few things you should definitely think about. Even if you are in tip top health, there’s no harm in planning ahead!
Consider a living will and trust to be a safety net or a form of financial insurance for the most precious things in your life – your family. Don’t dread the worst, but prepare for it by contacting attorney Ben Weaver today!
Beneficiary: Someone named in a legal document to inherit money or other property. Wills, trusts, and insurance policies commonly name beneficiaries; beneficiaries can also be named for “payable-on-death” accounts.
Custodian: The person named to manage property inherited by a minor, under a law called the Uniform Transfers to Minors Act, which has been adopted in almost every state.
Heir: Someone who inherits property under state law if there’s no valid will.
Trustee: Someone who has legal authority over the assets in a trust.
Testamentary: Having to do with a will. For example, a trust that is set up in a will is called a testamentary trust.
Testator: Someone who writes and executes (signs) a will.