Estate Planning With Young Children
One of the horrible “what ifs” of parenting is the thought that you may die before your children. Losing a parent can be difficult enough to manage for an adult, let alone a minor child (under 18 years of age). Many parents struggle with what they can do proactively to make things easier for their children and family if such a tragedy should occur.
If a minor child loses both parents, two types of decision-makers must be appointed: someone to make personal decisions for the child (healthcare, daily activities, education) and someone to handle financial and property-related decisions. With respect to those day-to-day decisions, it is usually necessary for a court to name a “guardian of the person” to raise the child (subject to court supervision). Under Florida law, however, if a minor inherits more than $15,000, then a “guardian of the property,” is required to manage the inheritance for the minor.
Guardianships are time-consuming, administratively burdensome, and typically very expensive (especially since a separate guardianship proceeding must be established for each child). There is typically no way to avoid the appointment of a guardian of the person in this scenario. However, parents have a number of tools available to help ensure that any inheritance passing to their children can be used for the child’s benefit while avoiding the expenses of a guardianship and the oversight of a probate court. Typically, these tools include the use of one or more trusts, either established under the parents’ last will & testament or under a revocable living trust established during lifetime.
I am often asked: why not just leave the funds to a relative or friend to use for the surviving child? While this may seem appealing, it has many, many drawbacks that can lead to disaster: Leaving funds intended for a child to anyone else provides little accountability. The friend or relative may not use the funds for the child’s benefit or they may take undue financial risks that subject the funds to loss. The funds would also be vulnerable to creditors of the friend or relative should they be sued or have judgments against them. Lastly, if the friend or relative dies, the funds may be completely lost to the original surviving children and pass to the heirs of the friend or relative (who may not care about or have any knowledge of the original intended use of those funds).
We typically recommend to our clients a specific form of trust called a child protection trust (“CPT”). A CPT has a number of advantages over leaving funds directly to a surviving child, a friend, or a relative. A CPT allows parents to designate one or more trustees to manage funds for the surviving child free of court involvement, but with oversight mechanisms to ensure the funds are used for the child’s benefit. A CPT continues until the beneficiary can best-handle their inheritance: when the child attains a certain age, attains certain life goals (maintaining a job or attending college), or is deemed responsible enough by the trustee to handle the funds. Most CPT provisions are fully customizable by the parents to construct a framework that reflects their wishes while leaving flexibility for “what if” scenarios (such as holding funds in trust should the child have or develop special needs or a disability that would preclude an outright distribution of funds). A CPT can even allow for different trust terms for different beneficiaries, tailoring these terms to the unique needs of each child.
Most parents avoid taking undue risks with their children’s safety and well-being during their lifetime. The use of a Child Protection Trust and other forms of estate planning protections can help ensure a child’s safety and well-being upon their parents’ passing.
Learn More During An Initial Consultation
To discuss estate planning for your family with one of our experienced attorneys, contact us in Coral Springs to schedule a consultation. Just call 954-228-6074 or fill out our online contact form. We serve clients throughout South Florida.