How Children Influence your Estate Plan

For families with minor children, parent’s have some interesting decisions when they draft their estate plan.  It is common for a parent’s will to leave specific directions to the executor of the will as it relates to their children.  For example, if there is no surviving parent and the child has not reached a certain age, the will may direct the executor to create a trust for the benefit of the child.

Benefits of a Minor’s Trust

Creating a minor’s trust has a number of benefits.  First, assets held in a minor’s trust can be protected against your children’s creditors.  Second, the trust terms may prevent frivolous spending of your estate assets, by limiting the use of funds.  This limited use may include education, health care, and living expenses (as opposed to a new luxury car).

What Age Should a Child’s Trust Terminate?

A minor’s trust can continue well past children reaching 18 or 21.  Parent’s set the age in which a trust can terminate and the asset of the trust be distributed directly to the children.  Ages range broadly between 21 and 40, however 25-30 seems to be the most common ages chosen.  Parent’s often consider the size of the estate that would be left to a child as well as their opinion of the child’s maturity, education and responsibility.

Individual or Pot Trust?

For families with more than one child, parents may consider leaving their estate in a trust for each child or in one trust for all the children (known as a “pot” trust).  Individual trusts for each child allows for a more fair distribution of estate assets.  For example, the will can direct each trust for each child to have equal shares of the parent’s estate.  Each child has a finite amount of assets available to them.  A pot trust however, may not distribute estate assets evenly. Rather, it will provide resources to those children who need the greatest support.

For example, if a child has a long term health issue, significant education expenses, they may require more assistance than the other children.  Also, the pot trust generally does not terminate until the youngest child reaches the age set by the parent’s will.  This could delay the older children receiving full control of assets until much later.

There are no right or wrong choices when considering children in an estate plan, but many considerations that are unique to each family.