The need to provide for one’s children is usually at the top of my clients’ lists when they come in for the initial consultation to discuss estate planning. If the children are minors, that desire is often even stronger. No parent wants to die before his or her child reaches adulthood, but in the event the unthinkable does happen, most clients view the need to provide financially for their children as they grow into adults as extremely important.
Several different options are available when it comes to estate planning with minor children. Many clients will contact me and initially claim all they want is a simple last will and testament so that they can designate who will take care of their children upon their death. However, as discussions progress during the consultation, the question of how the parents will provide for their children financially after death usually comes up next.
In Michigan, children receive their share of their deceased parent’s estate at the age of 18. This event occurs in the event the deceased died without a will (intestate) or with a will (testate). If the children are minors, it is usually the children’s guardian(s) who watch over this money until the child is 18. However, most 18 year old young adults are nowhere near ready to handle that amount of money and responsibility, which is why I usually recommend a revocable living trust for ensuring that the money is protected and ready for the child when the parent feels he or she is at the appropriate age. A revocable living trust allows the estate to be handled completely outside of probate, and the trust estate is handled by a person called the trustee, who is chosen by the parents, similar to an executor or personal representative in a will. However, the trustee is charged with a fiduciary duty to protect and invest this money so that it grows and is available for the children as they reach the required age.
The beauty of a trust is the parents can be as creative as they want in determining how and when their children receive their shares of the estate. This division can be done in percentages at specific ages, such as 25 percent at the age or 25 and the remainder at the age of 30. It can be contingent on the child graduating from high school or even college. A portion can be set aside to pay for the child’s wedding in the future. It depends on the family’s situation, what is important to them, as well as the maturity of the children involved.
Discretion can also be built in allowing the trustee to give money to the children or guardians of the children in the event of an exceptional circumstance, such as an illness or unexpected expense. The language within the trust, so long as it is concise and clear to understand, can be whatever the parent wishes.
A good estate plan should be reviewed every two to three years to ensure that it meets up with the person’s current situation. As the children age, and it becomes evident that an adult child can or cannot handle a large sum of money, this part of the trust can always be amended as needed. Similarly, if a different person needs to be chosen as trustee to handle the estate, this can be modified in the future, as well. When creating the initial decision on how the estate should be distributed, write it as if something were to happen to you tomorrow. How would you want your estate disbursed to your children to provide for them financially in the future? It will likely change as the years go by, but creating that initial plan and putting it into writing can give you peace of mind that your loved ones will be protected and provided for if you are not here personally.
At Sullivan Law, we offer estate planning packages at a flat and reasonable fee. We also offer free consultations to discuss what your needs are, what you would like to do, and how that can be best accomplished. Everyone’s needs are different, and your wishes should be clearly listed and understood. Sullivan Law is also a provider law firm through the Hyatt Legal Plan and regularly helps clients employed by many of the regional companies in the Greater Detroit area.
Call us at 248.917.1351 or email at asullivan@sullivanlawonline.com to schedule your free consultation today. We look forward to working with you!