When parents bring children into this world, they usually want to offer them every opportunity in life. Giving children financial and practical support is one of the many responsibilities that fall to new parents. While parents are healthy, they can directly fulfill this obligation on demand for their children. However, if their personal circumstances change suddenly, they may become unable to meet their children’s needs. In the worst-case scenario, they might die prematurely, leaving their children without parents and the support they provide.
Estate planning is, therefore, a common practice among new parents. They want to draft documents that can protect their children should anything happen to them. Preserving resources to ensure that their children have financial support is often one of the first goals when parents begin estate planning.
How can parents protect an inheritance for their children?
Address debts and ongoing support needs
An estate plan may need to factor in a child’s need for regular financial support while they are minors and also the outstanding financial obligations of their parents. Typically, creditors take priority over beneficiaries during probate proceedings.
Parents may need to acquire life insurance to ensure that there are resources available for their children when they die. They may also need to earmark funds to cover their debts and change ownership of certain assets so that they are not vulnerable to creditor claims.
Consider establishing a trust
The surviving parent or guardian caring for the children typically has control over any assets left to them. Those parties could squander an inheritance if left to their own devices.
Parents may therefore want to consider establishing a trust as a way of preserving certain resources for when their children become legal adults. Naming someone other than the surviving parent or guardian as trustee helps prevent scenarios in which one party misuses resources intended to support the children.
In many cases, parents can make plans that ensure their children have support even after they become legal adults. They could assume control over the trust or make direct requests for distributions from the trustee once they are adults who want to buy homes, go to college or start small businesses.
Thinking about the needs of children and funding a trust to meet them, even after a tragedy, can give parents peace of mind. A thorough estate plan is an important tool for those who want to protect their children from some of the uncertainties of life.
