Tuesday, April 14, 2015

Inheritance With Training Wheels

Happily, baby Sam and 4-year-old Rose will probably never need a financial guardian, as their parents, Ray and Liz, have no reason to believe they will pass away before Sam and Rose are grown.

But planning carefully is needed to provide care for them in case the unexpected does happen.  Ray and Liz are putting provisions in their Wills to create a trust for Sam and Rose after their deaths rather than simply rely on the guardianship court to protect their money until each one turns 18 and would have to receive his or her half of all the remaining money outright. 

As we noted last week, Ray and Liz think that 18 is too soon for either child to receive so much money.  In fact, perhaps there is no good age for either to receive one large sum of money as a ‘substitute’ for having their parents as a financial safety net. 

We recommend that an inheritance from a trust be divided into at least two different distributions; for example, half when the child beneficiary is 25 and the remaining half at age 35.  So the beneficiary would directly handle only part of the inheritance after the first distribution and, hopefully, learn from any mistakes he or she makes then. 

The other half of their trust money would still be managed and protected by the trustee until the age 35 distribution.  By then, their parents hope that they would not only be older, but also wiser because of their experience investing, spending or losing the first half of their inheritances.  

This two-part distribution plan can be a way to give ‘training wheels’ with a child’s inheritance.  To consider your alternatives for your own estate plan, please call our office at (815) 436-1996 for an appointment.

©2015 Gruber Law Office, Ltd.

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