Law News and Tips
The Case for a Trust
Fred L. Vilbig © 2019
If you have young children, you probably don’t want them to have a lot of money dropped in their laps all at once. If they’re under 18, that means a court-supervised conservatorship. The court would have to approve investments and distributions. Courts typically will only allow insured investments that don’t keep up with inflation, such as money market funds. And all of the trust distributions must be approved by the court or the conservator can be personally liable. And you’ll have to hire an attorney to do anything.
Even if your children are over 18, they may not be ready to handle large sums (and $10,000 can be huge to some people). The frontal lobe of the brain is the part of the brain that asks, “is this a good idea?” before you jump off a cliff or do something else thoughtlessly. In general, that part of the brain doesn’t fully form until you reach 25 years of age or so. That’s why teenagers and young adults make so many bad decisions.
Another problem with a large inheritance is that he can actually ruin a child. If they receive a sizable sum outright to early, it can ruin their work ethic. I have seen that happen all too often.
And then there is the child with special needs. If one of your children is receiving (or is likely to receive in the future) some governmental benefits, any inheritance can disqualify the beneficiary until all that money is gone.
In all of these cases, distributions in trust for the benefit of the child makes perfect sense. Some clients worry that setting up a trust requires a trust company of some sort. However, an individual family member can serve as the trustee. Even when the kids reach an age where you think they’ll be responsible, you might want to leave the assets in trust, but let your child be his or her own trustee. As long as they are not the ones who created the trust, the trust assets will be protected if there’s a divorce or in the case of a lawsuit.
And in the case of a child with special needs, in order not to cause them to lose their governmental benefits, restrictions need to be put onto the use of those assets to just supplement, but not replace, any government benefits. Under those circumstances, a properly drafted special needs trust is critical.
In all of these cases, creating a trust for the benefit of a child makes perfect sense. If you want to learn more about trusts, feel free to order my book by clicking here or on Amazon. If you want to set up an appointment to see if a trust is right for your children, please call my office at (314) 241-3963. I look forward to hearing from you.
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