Majoring In Minors

     Do you have any minor children (i.e., under age 18 in most states)? If you do, then your calendar is likely filled to overflowing with their school commitments and extra-curricular activities. Besides time, all of these commitments and activities require money … and lots of it. Since your children are worth the investment of both your time and your money, what plans have you made for them in a world without you? What would happen if your children were orphaned today?

Back-up Parents

     Who would you entrust with the responsibility of rearing your minor children to adulthood? By default, any surviving parent will be the legal guardian, or back-up parent, over your minor children. However, in the event there is no surviving parent, you must legally appoint the guardian(s) of your own choosing or a court will make the appointment for you. When selecting guardians, most parents appoint family members or friends with whom they share common principles, values and religious beliefs.

Inheritance Managers

     As with guardians for your minor children, unless you legally appoint inheritance managers, a court will make the appointment for you. Accordingly, you should legally appoint them because a court most likely will appoint the guardian to serve as the inheritance manager, too. This may not be the most prudent selection in any circumstance, and very few divorced parents would want their ex-spouses to manage the inheritance left to their minor children. Common candidates for this role include trusted family members or friends, professional inheritance managers (i.e., trust companies), or combinations of the two. [Note: It is wise to get permission from your intended guardians and trustees, as well as their alternates.]

Common Concerns

     Once you have appointed appropriate inheritance managers, you still need to protect the inheritance both for and from your children. There are three common concerns that can be hazardous to your wealth. First, the divorce rate has never been higher and blended families today outnumber original nuclear families. Second, lawsuits and bankruptcies are setting new records. Last, but not least, ambition-killing affluenza is always a concern whenever someone inherits wealth for which they did not personally work. Depending on how the inheritance is left to your children, it can either be a blessing or a curse.
     Without proper estate planning, your children will receive their full inheritance upon reaching legal adulthood (age 18 in most states). Will their inheritance be taken by a subsequent divorce, lawsuit or bankruptcy? Will it be converted into fast cars and extravagant trips, rather than college educations, first homes or seed money for a small business?
     Because of these concerns, some parents create plans that distribute the inheritance outright at designated ages (e.g., one-half at age 25, with the balance at age 30), once their children gain some life experience and maturity. While this is better than a full, outright distribution upon reaching legal adulthood, it does not offer the maximum inheritance protection available by law.
     The greatest inheritance protection is achieved when your estate plan creates a Long-Term Discretionary Trust to administer the inheritance for your children. Such an arrangement can make both income and principal available to your children for their health, education, maintenance and support, as well as for any purpose deemed appropriate in the discretion of your appointed inheritance managers.
     Properly drafted, a Long-Term Discretionary Trust may serve as an estate plan within a Life & Estate Plan. How? Upon the death of your children, the inheritance can continue for their own children. If they have no children, then the inheritance can continue for their siblings … without any unpleasant or unintended consequences.