Planning For Minor Children & Multi-Generational Objectives
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Estate planning includes planning with wills and trusts to pass money and possessions from one generation to the next. Too often, an older generation ignores the effect of its plans upon younger generations. That poor foresight allows poorly planned inheritance to vanish quickly, sometimes without fault of the heirs. This article highlights some instances that require more thoughtful planning.
Minor Children
Parents should consider what would happen if they would die or become incapacitated while they are raising young children. Choices of guardians and trustees grieve many parents, but the difficulty of the choice simply emphasizes the importance of the choice. Parents should nominate guardians and appoint trustees in special powers of attorney and wills. Child-sensitive wills include trust language to protect children’s inheritance from their youthful indiscretion and preserve wealth until the children mature. It is important to update those plans with new guardians, trustees, and beneficiaries as circumstances and objectives change. For example, if you nominate a married couple to serve as guardians, you should update the will and power of attorney if that couple divorces.
Multi-Generational Planning
Multi-generational planning makes good sense for grandparents too. Grandparents should consider setting up trusts in their wills or revocable trusts to ensure that young grandchildren do not receive money before they become adults. For example, if the parents die before the grandparents, or become disabled, the grandparents’ estate plans should authorize another person to manage the wealth instead of leaving it to young grandchildren freely. I you own a business that one or more of your children may operate someday, you will need expert-level planning to balance your desire to help the business succeed with your desire to treat your beneficiaries “fairly.”
Disability & Spendthrift Planning
Parents often want to help their children, but a child or the child’s spouse may suffer health problems that require Medicaid assistance. Unless your wealth could bankroll beneficiary healthcare expenses adequately, you should consider planning around a beneficiary’s problems. Parents and grandparents should consider weaknesses and vulnerabilities of their children and grandchildren during the estate planning process. Parents and grandparents of disabled or drug-addicted children may want to use “special needs” or “spendthrift” trusts to provide care for the beneficiaries. The trusts could make funds available for the beneficiaries, but prevent the funds from disqualifying the beneficiaries for public assistance or enabling them to squander the assets on drugs or alcohol. The trusts can also empower trustees to require beneficiaries suspected of drug abuse to submit to drug testing before distributing money to the beneficiaries.
Wealthy Children
Some children accumulate their own substantial wealth. Those children, who have federal estate tax issues in their estate plans, may not need more wealth piled into their estates. Parents should discuss these issues with their financially successful children and plan to compliment their children’s plans. In some families, the older generation should bypass the children and enrich the grandchildren to minimize federal estate taxes for all generations.
Most people are fortunate enough not to face these problems in their families. If you are one of those people with disabled, unstable, or very wealthy children or grandchildren you may help them more with more detailed estate planning than normal. An experienced trust and estate lawyer can help you make such a plan.
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers and active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator, a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation; a member of the Illinois State Bar Association and the Indiana Association of Mediators; and he was the 2014-15 President of the Indiana State Bar Association.
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