Estate Planning Oversight: Overlooking Plans for Minor Children or Beneficiaries

by | Jan 17, 2024

Are you taking proactive steps for the well-being of your minor child?

One of the primary objectives of estate planning focuses on ensuring the care and welfare of your children in the unfortunate event of both parents’ deaths.

As a parent with minor children, it is crucial to establish a comprehensive Will that designates a guardian. However, before listing someone as the designated guardian, you should make sure the person listed understands the role of a guardian. Beyond the guardian’s designation, it is vital to articulate detailed instructions on how you envision the upbringing of your children. Factors to weigh when selecting a guardian include their geographic proximity to the children’s current residence, religious beliefs, lifestyle, and the presence of other family members in their household.

Conservatorship for a Minor’s Inheritance:

Parents of minor children should establish a trust to safeguard their children’s inheritance. Insurance companies typically cannot disburse substantial sums directly to a minor child. If a twelve-year-old is named as the beneficiary, a court-mandated conservatorship is necessary for managing the child’s inheritance. The associated costs of obtaining a conservatorship can be significant. Moreover, funds in a minor’s conservatorship run into restrictions by the court, such as prohibiting funds from being invested in the open market. This oftentimes leads to a decline in the inheritance’s value due to inflation.

Another significant drawback of a minor’s inheritance residing in a conservatorship is that, generally, the funds are obligated to be transferred to the minor once they reach 18 or 21 years of age. These ages are often deemed less than optimal for handing over a substantial inheritance to a child or grandchild.

Trust for Safeguarding a Minor’s Inheritance:

The good news is that an inheritance held in trust for a minor allows for specific directives on fund management, as well as distributions for purposes like education. It also permits the specification of the age, or a phased approach over multiple ages, at which the funds will be transferred to the minor beneficiary.

As long as the inheritance remains in trust under the oversight of an independent trustee, it can be shielded from potential challenges, including the minor’s:

  • Unwise spending habits
  • Future divorced spouse claims
  • Creditors or legal actions against them

Furthermore, a continuing trust can delineate the successor beneficiaries in the event of the child’s demise. Proper investment strategies can also contribute to the growth of the inheritance, providing sustained financial support over time. These considerations underscore the importance of proactive planning for your minor beneficiary.

What’s the Solution?

Consult with your estate planning attorney to establish a trust that offers comprehensive guidance on a minor beneficiary’s inheritance. Schedule your complimentary initial consultation with our seasoned attorneys online or by calling our office at 816-399-2757.