Once you become a parent, much of your life begins to revolve around the needs of your children. From how you approach your career to how you arrange your household, there will be many ways that you will have to adjust your life to better support your children.
If you haven’t yet created an estate plan, becoming a parent can be the motivation you need to finally sit down and create testamentary documents. If you already have an estate plan in place, then you likely understand how important it will be to properly protect your children.
How structure your estate plan will have a major impact on your children’s lives if anything were to happen to you. Many parents these days decide to add a trust to their estate plan to provide an inheritance for their children. What are some of the reasons people create trusts when they have children in their family?
They help preserve assets
If you were to die but the other parent of your children did not, they would have potentially have complete control over your children’s inheritance until they become adults. Whether you divorced the other parent or never had a long-term relationship with them, you may worry that they could abuse that access and burn through your children’s inheritance, leaving nothing for them when they turn 18.
A trust limits how much a parent or guardian will be able to access your children’s inheritance and can therefore provide resources for when your children are adults and can no longer depend on someone else for support.
They make it easier to connect with state aid
Children who have lost a parent may qualify for certain benefits, but a lump-sum inheritance could complicate that. When your children receive a large windfall, even if it is under the control of their parent or guardian, they may lose their eligibility for benefits that would otherwise contribute to their overall standard of living.
They can help children achieve certain goals
Maybe you dream of your child becoming a homeowner sending college. Perhaps they are in middle school but already talk passionately about opening a bakery someday. When you put a child’s inheritance into a trust, you can limit what they use those assets for once they become an adult.
Designating someone’s inheritance to cover cost-of-living expenses, educational expenses, a down payment on a home or similar future financial needs will allow you to have a specific, positive impact on your child’s life possibly many years after you die.
Although it can be very unpleasant to think about your own death and how your children would struggle in that situation, the best chance of protecting them comes from planning ahead for every potential scenario. Adding a trust to your estate plan can be a smart move if you want to provide for your children after you die.