Estate Planning for Parents of Young Children (Part 4)
June 15, 2015 - Posted by: admin - In category:
An 18 year old high school senior is holding a check for $150,000…what are the odds that this young man uses such money wisely? The chances are not great.
We all dream of wining the lottery–the thrill of getting an enormous amount of money, all at once, that we didn’t have to earn. We then consider what we would do with the same–the trips, the cars, the big houses, etc., etc., etc…What does this have to do with planning for parents of young children? Great question, glad you asked.
Once you have accomplished the other basic steps we outlined in prior posts, including a basic Will, proper beneficiary designations, using a valid Trust and related items, you should first congratulate yourself for being more wise and more thoughtful than most other all parents of young children. Seriously. Then, you should continue to make wise choices and go further in your planning so that you formulate a method of distribution that is more careful and more considerate of the well-being of your children than simply giving them a lump sum (perhaps a life insurance lump sum) at the age of 18 or the age of 21. Just as parents of a 3 year old child will withhold a great many things from the access of such a toddler for the good of the toddler, so also parents of children of any age will often prevent a situation where such children gain premature access to large sums of money. Such parents recognize that even the best and most mature teenager or young adult stands the chance of being dissuaded from a wise course of action, a wise course of saving and investment, if such a young person is given tens or hundreds of thousands of dollars all at once. In fact, this same “human nature” element holds true in many cases for older adults as well. To summarize, most of us consider “found money” to be money that we are free to use for whatever. While some individuals are immune to this folly…such individuals are rare indeed.Consider what you did with the last stack of “found money” you received–whether from an unexpected bonus, a tax return or otherwise.
What is the point of all of this? If you are going to go through the thought, trouble and expense establishing protections for the benefit of your children (young or old), why not also ensure that when such beneficiaries receive assets, they receive them over a period of time, in smaller rations? We have found that this one very simple concept can do more to foster the wise use of inherited property than just about any other thing. This incremental distribution pattern for the benefit of young and old can be done in a variety of ways–there are still an innumerable number of options with this approach. In other words, you remain free to customize your plan to fit the very unique needs of each individual. As we all know, what is good for one person may not be best for another person. Since we are dealing with people, we must factor in the unique skills, strengths and weaknesses and potential challenges of each such person. As we always say, this is NOT “one size fits all” stuff!