Conservatorship

What is the Best Way to Leave an Inheritance to a Grandchild?

Leaving an inheritance to a grandchild requires careful handling, usually under the guidance of an estate planning attorney. Specially if your grandchild is under the age of 18.  The same is true for money awarded by a court, when a minor has received property for other reasons, like a settlement for a personal injury matter.

Use trusts when leaving an inheritance to your grandchild
Leaving an inheritance to your grandchild in a trust will protect the child and the inheritance.

According to the article “Gifts from Grandma, and other problems with children owning property” from the Cherokee-Tribune & Ledger News, if a child under age 18 receives money as an inheritance through a trust, or if the trust states that the asset will be “held in trust” until the child reaches age 18, then the trustee named in the will or trust is responsible for managing the money.

Until the child reaches a stated age (say, 25 or 30 years old), the trustee is to use the money only for the child’s benefit. The terms of the trust will detail what the trustee can or cannot do with the money. In any situation, the trustee may not benefit from the money in any way.

The child does not have free access to the money. Children may not legally hold assets in their own names. However, what happens if there is no will, and no trust?

A child could be entitled to receive property under the laws of intestacy, which defines what happens to a person’s assets, if there is no will. Another way a child might receive assets, would be from the proceeds of a life insurance policy, or another asset where the child has been named a beneficiary and the asset is not part of the probate estate. However, children may not legally own assets. What happens next?

The answer depends upon the value of the asset. State laws vary but generally speaking, if the assets are below a certain threshold, the child’s parents may receive and hold the funds in a custodial account. The custodian has a duty to manage the child’s money, but there isn’t any court oversight.

If the asset is valued at more than the state threshold, the probate court will exercise its oversight. If no trust has been set up, then an adult will need to become a conservator, a person responsible for managing a child’s property. This person needs to apply to the court to be named conservator, and while it is frequently the child’s parent, this is not always the case.

The conservator is required to report to the probate court on the child’s assets and how they are being used. If monies are used improperly, then the conservator will be liable for repayment. The same situation occurs, if the child receives money through a court settlement.

Making parents go through a conservatorship appointment and report to the probate court is a bit of a burden for most people. A properly created estate plan can avoid this issue and prepare a trust, if necessary, and name a trustee to be in charge of the asset.

Another point to consider: turning 18 and receiving a large amount of money is rarely a good thing for any young adult, no matter how mature they are. An estate planning attorney can discuss how the inheritance can be structured, so the assets are used for college expenses or other important expenses for a young person. The goal is to not distribute the funds all at once to a young person, who may not be prepared to manage a large inheritance.

For more information about leaving assets to children, download Mastry Law’s free book or estate planning reports.

To learn more about how to transfer assets to your grandchildren using a trust, schedule a complementary consultation with Mastry Law.

Reference: Cherokee-Tribune & Ledger News (March 1, 2019) “Gifts from Grandma, and other problems with children owning property”

Here’s Why You Need an Estate Plan

It’s always the right time to do your estate planning, but it’s most critical when you have beneficiaries who are minors or have special needs, says the Capital Press in the recent article, “Ag Finance: Why you need to do estate planning.”

While it’s likely that most adult children can work things out, even if it’s costly and time-consuming in probate, minor young children must have protections in place. Wills are frequently written, so the estate goes to the child when he reaches age 18. However, few teens can manage big property at that age. A trust can help, by directing that the property will be held for him by a trustee or executor until a set age, like 25 or 30.

Probate is the default process to administer an estate after someone’s death, when a will or other documents are presented in court and an executor is appointed to manage it. It also gives creditors a chance to present claims for money owed to them. Distribution of assets will occur only after all proper notices have been issued, and all outstanding bills have been paid.

Probate can be expensive. However, wise estate planning can help most families avoid this and ensure the transition of wealth and property in a smooth manner. Talk to an experienced estate planning attorney about establishing a trust. Individuals can name themselves as the beneficiaries during their lifetime, and instruct to whom it will pass after their death. A living trust can be amended or revoked at any time, if circumstances change.

With a trust, it makes it easier to avoid probate because nothing’s in an individual’s name, and the property can transition to the beneficiaries without having to go to court. Living trusts also help in the event of incapacity or a disease, like Alzheimer’s, to avoid conservatorship (guardianship of an adult who loses capacity). It can also help to decrease capital gains taxes, since the property transfers before their death.

If you have minor children, an attorney can help you with how to pass on your assets and protect your kids.

For more information about how to best protect your minor children, download a copy of Mastry Law’s FREE report, A Parent’s Guide to Protecting Your Children Through Estate Planning.

Reference: Capital Press (December 20, 2018) “Ag Finance: Why you need to do estate planning”

Will Your Heirs Receive What You Wanted, Or Will There Be a Family Battle?

To be certain the heirs you intend inherit the assets you intend, remember these points

One of the reasons that people do estate planning, is to make sure that their assets go to the people they want.  However, when things change, and estate plans aren’t updated, it doesn’t always work out.

MP900178564If you are like most people, most of your assets are in retirement accounts, annuities, life insurance policies and pensions, says MD Magazine in its recent article, “Making Sure Your Heirs Get What You Intend.” These accounts require that a beneficiary be named, and those assets go directly to the beneficiary on the death of the owner.

It’s not uncommon after a few years, for a person to forget which beneficiaries they specified for a life insurance policy or pension. Perhaps it’s a first spouse and they’ve now remarried. There’s no “do-over” after you’re gone, which can lead to considerable confusion and stress. It will also ultimately disappoint your intended heirs. In addition, based on whether and how some other assets are designated in estate planning documents, some states may send the matter to probate. This can be a long and expensive process, since if the estate plan was done right in the first place, it wouldn’t be needed.

To be certain the heirs you intend inherit the assets you intend, remember these points:

  • Keep track of the beneficiaries you’ve designated for your accounts. If you don’t recall, check with these institutions.
  • Don’t rely on cookie-cutter, one-size-fits-all estate planning products. Get a custom plan from an experienced estate planning attorney, even though it may cost a little bit more money.
  • Regularly review the beneficiary designations on your financial accounts and those in your will, to be sure they’re in sync and current.

Some people think they are required to create a trust for estate planning, when a well-drafted will and clear beneficiary designations will suffice. Talk to your attorney to determine if a trust is a good idea for your specific situation. The primary reason in some cases to have a trust is potential incapacitation.  Therefore, a trust can empower heirs to manage your estate without first going to court to get a conservatorship, which can be time-consuming and costly.

A trust can also be way to manage your estate “from the grave.” A trustee is appointed to assure that assets are distributed according to specified instructions. This can be a good way to make sure heirs with dependency issues don’t burn through their inheritance quickly or spend it on the wrong things. Trusts can also be a smart way to ensure the care of a disabled relative.

A qualified estate planning attorney will help you create an estate plan, which should include a thorough evaluation of all of your assets and updating your beneficiary designations.

Reference: MD Magazine(July 25, 2018)“Making Sure Your Heirs Get What You Intend”

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