Southern Minnesota Trust Planning Lawyers
If you have minor children, you want to be sure that they are protected in the event of your death. You may have already drawn up a will. However, a will must be probated in court, and the terms of the will become a matter of public record. As part of their estate planning, many people create trusts to protect assets for their children.
Living trusts do not have to be disclosed or approved by the court. There are many types of trusts, such as trusts for the benefit of disabled children, or adults who are unable to manage their finances, so it is important to understand which is right for your situation.
What is a trust?
A trust is a way to manage the distribution of your assets. It is created when the owner of the property (sometimes called the grantor, or settlor) transfers property to a person called the trustee. The trustee is responsible for managing the property for the benefit of one or more beneficiaries. The trustee is required to follow the terms of the trust and make decisions that are in the best interests of the beneficiaries.
There are two fundamental categories for trusts. A testamentary trust is created by a will. The assets in these trusts usually go through probate and may be subject to further court supervision. A living trust is created during the grantor’s lifetime. A revocable living trust allows the grantor to make changes to the trust and also serve as trustee during his lifetime.
People often assume that trusts are only for wealthy people. However, trusts can serve a variety of purposes including to protect the interests of minor children.
How a trust protects minor children
If you die without a will or without establishing a living trust, probate court proceedings will be necessary. This process may be time consuming and costly. As the parent of a minor child, you can maintain control of your assets in the trust during your lifetime, and after your death, the assets will be managed according to the terms of your trust.
Planning your trust
Planning your trust involves making long-term decisions. Here are some of the issues you need to consider.
- Who will be the trustee? If you choose to create a revocable living trust, you can be the trustee, but when you, or you and your spouse, die, who will be the successor trustee? The person you choose as a guardian, to care for the children, may not necessarily be the best choice to manage their finances. The trustee must oversee your assets in accordance with the terms you have outlined in the trust documents. The trustee will make decisions about spending money for the care of your minor children as well as other necessary distributions to them.
- How and when should your children receive the trust funds? This involves looking into the future and making educated guesses about your children’s future lives. At age 18, many people are not sufficiently mature to manage large sums of money. Adults who receive a substantial inheritance at a young age may spend their money quickly and be left with nothing. You can, however, provide that the money should be distributed in staggered increments, perhaps at ages 25, 30 and 35. You can also empower the trustee to use funds to pay for such needs as education, or medical needs.
- Are there minor children from other relationships? You may need to plan for children from a prior relationship or other minors for whom you are responsible. Careful consideration and planning for these situations will benefit the minor children and also avoids hard feelings among children in the future.
- Do you own a business? How will your business interests be handled after your death? You may need to consider a buy-sell arrangement with your business partners and including provisions related to your business in your trust.
When creating a trust, you should work with an experienced estate planning attorney who can advise you on the best estate plan for your particular situation. For more information, contact us.