Many parents and grandparents don’t realize how creative they can be in distributing their assets to their children upon their passing. They also think it’s only for rich people and it’s an expensive process with high-powered attorneys. That’s certainly not the case…anybody can control their kids from the grave with unique trust provisions. You’ll love it.
Don’t let the attorneys get your estate in an expensive battle with your family fighting over your estate. Make a Plan! An average American should be able to get a comprehensive Estate Plan with a Revocable Living Trust…AND crafted with most of the unique provisions their children need for around $1,500.
So for you control freaks out there that want to manipulate your beneficiaries after you’re gone and continue to wreak havoc on their lives…this article is for you! And you know what…it’s your money, so do with it as you please.
A Revocable Living Trust is Key
A Revocable Living Trust is a unique document and the backbone of an overall Estate Plan. It’s a private document that can accomplish a number of objectives, including unique provisions for your minor children or children that act like minors. The Trust is administered by you during your life and by a Trustee that YOU choose upon your passing. This person, or company, will handle all of your assets the way YOU decide in advance.
The Trust is also designed to allow your Successor Trustee to handle your affairs privately and without court involvement. However, while you’re alive you can change your Trust at any time…it’s a ‘Revocable’ Living Trust! If you get remarried, your kids tick you off, or you decide to completely restructure your entire estate, you can change your Trust however you want!
When it comes to your beneficiaries the Trust gives you maximum flexibility in designing it the way you desire, not according to a judge or lawyers handling your estate in probate after your passing. YOU control the creative trust provisions for your children, not the Court.
The ‘Carrot’ and the ‘Stick’
Most parents take a 2-pronged approach with their masterfully crafted Estate Plan…the ‘carrot’ and the ‘stick’. Most importantly, you write the law when it comes to your Trust. You can create any provision that best serves your wishes and hopefully your children at the same time.
First, parents want to provide a ‘carrot’ for those children or grandchildren who are willing to work and earn more of their inheritance. Creating incentives for children to accomplish and become better citizens also tends to be a more justifiable reason for controlling circumstances and their lives from the grave.
Second, they also oftentimes want a ‘stick’ or terms that don’t allow beneficiaries to abuse their trust and inheritance by making reckless or lazy decisions…and what’s wrong with that? If children don’t want to take care of themselves physically or emotionally, or can’t, a properly drafted Trust should have consequences or a structure tailored to their needs.
Unique Provisions to consider
Here are just a few creative trust provisions for children we discuss with our clients and have them consider in a well-drafted Estate Plan:
- Require your trustee to hold children’s inheritance in trust until they reach the age of 25, 30, or 35. Give it to them in stages, e.g., a third at age 25, a third at age 30, and the final third at age 35.
- Use a joint trust for minor children until the oldest reaches age 18, then split up the trust into individual trusts for each child. This makes it easier for the trustee to manage the trust while the children are minors. Then when different children pursue business, education, marriage, or even world travel, their trust is accounted for separately from the others.
- Consider having the trustee give the guardian of your children a specific amount each month to take care of the living costs of your minor children (room, board, clothing, school supplies, etc.). It could be something like $1,000 a month, adjusted for inflation as of the date of your trust.
- Place restrictions on inheritance if there’s drug or alcohol abuse. An attorney can insert a provision that prevents distributions to any child with an abuse problem and allow for the trustee to hold their funds in the trust until they have their life under control.
- Give the inheritance in matching funds, distributing $1 for every $1 the child earns.
- Give them a bonus for graduating from certain levels of college or don’t allow full distribution until they obtain a certain level of higher education. However, still distribute funds for school or any secondary education program, skills training course, etc.
- Distribute funds for education, but use their GPA as a “carrot”: Distribute funds only if children maintain a minimum GPA that you set. You could also tie funds for tuition or books to GPA to help keep the children focused on finishing school, rather than becoming career students.
- Distribute a certain amount of funds for a wedding.
- Distribute funds to start a business upon the presentation of an acceptable business plan to the trustee. Name a board of advisors to approve any small business or investments by the children.
Children with Special Needs
I’ve learned from those dedicated and amazing parents with children who have special needs, that their greatest and waking concern is “what will happen to my child if I’m not there to take care of them?” I can’t imagine this constant fear and stress. There is certainly a special place for these parents in heaven.
Well, if there’s any good news, a well-drafted Living Trust can help dramatically reduce this pressure and concern. Creative Trust provisions for children with special needs can be drafted for a specific guardianship, establish a trustee for the money, and a structure and procedure to allow your child to still access Federal and State aid if needed.
There can even be backup plans created and implemented so parents can rest assured there will be some safety net for their handicapped child if they predecease them.
If You don’t make a Plan…the State has one
Millions of Americans die each year without any type of estate plan in place, and this forces their families into the probate court system. Here they experience huge expenses with lawyers, court fees, and significant time delays when they would rather be mourning. Worse yet, without a plan…the State law will implement a plan for the distribution of their assets.
If you’re one of those millions of Americans with children AND assets, it’s time to quit putting off your Estate Plan. Find an attorney with good estate planning experience and start the process. If you are willing to consider our full-service law firm, the timing couldn’t be better to get your affairs in order…check out our Annual Estate Planning Special here, or give us a call at 435-586-9366.
* To sign up for Mark’s weekly Free E-Newsletter and receive his Free E-Book “The Top 10 Tax Strategies for Every American” visit www.markjkohler.com.
Mark J. Kohler is a CPA, Attorney, and co-host of the Main Street Business Podcast and The Self-Directed IRA Podcast. Author of the “The Business Owner’s Guide to Financial Freedom- What Wall Street isn’t Telling You” and, “The Tax and Legal Playbook- Game Changing Solutions For Your Small Business Questions”. Mark is also a senior partner at the law firm of Kyler Kohler Ostermiller & Sorensen, LLP, and the accounting firm K&E CPAs, LLP.