Secure Your Children’s Inheritance By Avoiding These Easy Mistakes

I may be wrong, but I think most every parent wants to protect their children no matter what stage of life they are in. You may have heard that setting up a trust fund for your loved ones can make sure that whatever you leave behind is there when they need it. I talk to a lot of parents who think they are doing the right thing but who fail by making one of these mistakes. Setting up a trust fund for your children can ensure that the money you leave behind for them is taken care of, in the way that you want. Unfortunately, these mistakes are more common than you realize so let’s make sure that you don’t make any mistakes with your loved ones.

Leaving Assets Outright to Kids 

One of the worst things I see people do is nothing. That’s right; they do nothing, zilch, nada. Instead, they leave whatever they have to their children outright. Thus leaving those assets unprotected. It also means that if their child is under 18 years of age, a judge and the Court will be involved. By doing nothing, and leaving it in the hands of a child, a court has to appoint a guardian to handle the assets for them before they turn 18. What they also don’t realize is that it’s likely that those assets will not be used in the way they want. On top of that, if a professional Trustee is appointed by the court, the money paid to the professional Trustee and the costs of handling the assets could drain what’s left for your kids, quickly.

Not Carefully Choosing a Trustee 

Even parents who set up a trust to hold what’s being left behind for their kids often do not think carefully enough about who the Trustee should be. Do you want one trustee or would it be smarter to have co-trustees who can ensure the funds are well managed? Choosing more than one trustee can provide some accountability for how the funds are used. 

Not Properly Protecting Assets Left In Trust 

Another mistake parents make when setting up a trust is distributing the assets out of the trust to their children at a specific age or stage in the future rather than, holding those assets in a flexible lifetime trust. I think it is important when you build a trust to educate the whole family of what will work best for them. Too many people see a trust as merely a way to avoid probate. A proper trust can protect your kids’ inheritance well into the future if your kids know what the end goal is. A trust can protect their inheritance from future events such as if a marriage goes bad, or life events are such that creditors or lawsuits plague your children in the future

Unfortunately, most lawyers do not understand how to use trusts to establish this kind of long-term protection. I hear lawyers that don’t do estate planning suggest that it’s not necessary to have a trust if you have a smaller estate. that is not true if your goal is to protect those assets and teach your children how to manage them into the future. Which can be a huge turning point for many generations to come.

Neglecting to Fix Beneficiary Designations 

Lastly, make sure your insurance policies are directed to your trust and not to your children. This is the most frequently made and huge mistake we repeatedly see. Naming minors or even young adults as the beneficiaries of insurance and retirement accounts is a sure-fire way to ensure that the money and assets do not last and are not used in the way you would want. And of course, there is the likelihood that they will unnecessarily get stuck in the court process. Why would you let that happen when you can easily avoid it through proper planning? 

You can easily create a trust that can both provide for and protect your children after your death. That same trust can also ensure you are cared for the way you want in the event of your incapacity. If you’re ready to set up an effective plan for your family’s well-being and care we are ready to help protect, preserve and enhance what matters most.