How can you take care of kids in your Estate Plan? nominate caregivers; provide assets while child is minor; support education; trickle out distributions.
Nominate Caregivers for Surviving Minor Children.
Sometimes, parents of minor children pass away. It is best if you have thought about who may care for them. Of course, this is a horrible thing to consider. However, the surviving minors in this situation need a guardian and conservator to be legally appointed for their care. The guardian cares for the person and their health. The conservator cares for the finances and assets of the minor. The same person can serve in both capacities. A Kansas court is to give priority to nominations of the natural guardian for minors. You can take care of this easily in your estate plan. If you do not, then the court may look to family or other interested persons in making these important selections.
Provide Assets for Support While Children are Minors.
You may set aside funds to be held in Trust to provide for the care of children while they are minors. Your nominee for conservator may be entrusted to spend assets on behalf of the children for health, welfare, maintenance and support. In other words, you may be in a situation where you are asking that someone take care of your children so long as they are minors. Providing funds to support that effort goes hand-in-hand.
Set Aside Funds for Education.
Many people decide to allocate funds to support education (after high school) for their children or grandchildren. In a Trust, we can set aside funds so that the trust distributes, for example, to satisfy the need that other scholarships or financial aid may not fill. And — if you like — the trust may limit to a certain maximum dollar amount how much may be distributed to such child, in total or per school year from such fund.
Provide that Distributions may be Trickled Out.
Trickling out distributions may help provide income over time for your beneficiaries. It may also minimize tax consequences to them. I have written a lot of trusts wherein people designate that final distributions to their children go partially at, for example, ages 22, 26 and 30. People pick a variety of ages, but the idea is that your child does not receive an additional $50,000 in one year. But instead, perhaps they receive those assets (and interest) over the course of three distributions in different years.
Your trust can also provide that distributions coming originally from an IRA are spread out a bit. The same logic applies: your trust distributes to a beneficiary in installments over a few years. This spreads out the income to the beneficiary and may allow the assets to earn interest or dividends during the distribution period.
How can you take care of kids in your Estate Plan? It is not that difficult, but you have to begin, if you are going to take care of it. After all, who is more important to you?
Bonus: remind your children that when they inherit certain assets from you, they can minimize capital gains taxes by electing a step-up in basis.
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