Having at least a basic estate plan in place should be a priority for every adult; however, when you become a parent, estate planning takes on heightened importance. Knowing that your children will be financially secure in the event something happens to you provides you with invaluable peace of mind. When creating your estate plan, you will need to decide how to pass down the inheritance you plan to leave your children. An Estate Planning Attorney at The Collins Law Firm helps parents with minor children decide if a Will or a Trust is the right choice to pass down an inheritance.
Last Will and Testament Basics
A Last Will and Testament is a legal document that communicates a person’s final wishes pertaining to possessions and dependents. In your Will you can make both specific and general gifts to loved ones, charities, or even your family pet. Your Will is also where you will appoint someone to be the Executor of your estate. Your Executor plays a vital role in the probate of your estate after your death. Finally, a Will provides you with the only official opportunity you will have to nominate a Guardian for your minor children in the event one is ever needed after you are gone.
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor (also referred to as a Maker or Grantor), who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. All trusts are first divided into one of two categories – testamentary or inter vivos – the latter of which is more commonly referred to as a living trust. A testamentary trust is a trust that arises upon the death of the Settlor and is typically activated by a provision in the Settlor’s Will. A living trust is a trust that takes effect as soon as all the legalities of creation are in place. Living trusts are further divided into revocable and irrevocable living trusts.
Will or Trust – Which One Is Better?
If you wish to leave an inheritance behind for your young children to ensure that they are financially secure if something happens to you, either a Will or a trust can be used to accomplish this goal. There are several important reasons, however, why you should consider using a trust.
Your minor children cannot legally inherit directly from your estate. Therefore, assets bequeathed to a minor child in your Will must be managed by an adult until the child reaches the age of majority. If you use a Will to gift assets, however, a court may end up deciding who that adult is that manages the assets. Moreover, you have very little say regarding how those assets are used when they are gifted in a Will. Finally, assets gifted in a Will must go through probate, meaning it could be a long time before they are available for the support and maintenance of your child.
If you choose instead to pass down assets using a trust, you have the ability to appoint the Trustee of the trust, meaning you decide who will manage your child’s inheritance. Furthermore, you can use the trust terms to retain a certain amount of control over how the assets are distributed and used. For example, you could dictate that a specific amount be distributed monthly or yearly for routine expenses and then include a procedure for additional distributions as needed for emergencies or special expenses. Lastly, assets held in a trust bypass probate, meaning they can be distributed as soon after your death as you allow in the trust terms.
Contact a Los Angeles Estate Planning Attorney
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about passing down an inheritance to your minor children, be sure to consult with one of our estate planning attorneys. Contact the Collins Law Firm by calling (310) 677-9787 or online at collinslawgroup.com to register for one of our FREE estate planning workshops.