Can I Set Up a Trust for a Child?
If you are the parent or guardian of an adult who depends upon you financially, estate planning is critical. When you can’t care for your child, an estate plan which includes funding and guidance protects your dependent and ensures that they will receive the care they need, reports Parents in the article “Wills and Trusts for Adult Dependents.”
First, you need a will. This fundamental estate planning document lets you be very specific about what you want to happen after your death. It also nominates guardians for minor and adult children and pets. Wills can be used to manage decisions that apply to everyone. If there is no will, the laws of your state and a court make all of the decisions, not you.
Minor Children. If you have dependents, the will lets you choose who you want to serve as a guardian (called the Tutor under Louisiana law) for your children. If you are already the legal guardian of a dependent adult, the will can be used to name the person to take over for you. Choose guardians (tutors) who are up to the responsibilities that come with caring for a dependent adult.
The will is used to manage assets after your death. However, in the case of a dependent adult, you may also need a Special Needs Trust. If you pass assets directly to a dependent adult and they are receiving certain government benefits, the inheritance may make them ineligible for benefits and services.
Adult Children. You can also set up a trust for a child that is a major. For instance, if you are concerned that your child or children are financially irresponsible, or just may not have enough maturity to manage assets, you can specify that a trust be established for them with distributions made at “ages and stages”. Also, you may be concerned about them declaring bankruptcy, or being under the influence of drugs. Believe it or not, many of my clients are concerned that if one of their children were to inherit too much money directly, they would be tempted to use that money for illegal substances and therefore overdose. A trust that is established to give them just what they need might be a better answer than a bequest to them outright. Another example, may be a trust established for a child or children who are hounded by creditors, or are going through a divorce. All such trusts should be established as “spendthrift trusts.”
Special Needs Children. A Special Needs Trust is a trust set up for a child who is disabled or impared. A Special Needs Trust allows you to earmark a certain amount of money for a special needs child of any age for their care. An estate planning elder lawyer will be familiar with this type of trust and help you create it.
If your dependent adult does not receive any means-tested benefits but is not able to manage an inheritance, then a trust can be used to hold assets to be controlled by a trustee, who might also be a guardian or caretaker.
Summary. A will and trusts are central to a well-prepared estate plan. Working with an estate planning attorney will give you the opportunity to consider how you want to distribute assets while you are living and after you have died. It also gives you the opportunity to name a personal representative, or executor, who will manage your estate after your death and be in charge of making sure that your wishes, as expressed in your will, are followed.
Trusts, which you can set up for a child or any age, are more complex than wills and allow for a greater degree of control over assets. The trust is a legal entity to benefit others, and a trustee is the person named to be in charge of the trust.
Bear in mind that anything passed through a will has to go through a court process known as probate. The will has to be validated and the executor has to be approved by the court. Any assets in the trust are already outside of your estate and do not go through probate.
To learn more about estate planning topics, read these articles: Must I have ‘Prince’-like Riches to Need a Will? and Do I Have to Pay Deceased Loved One’s Taxes? and What Happens when Homeowner Dies without Will? and What are the Early Signs of Dementia?
BOOK A CALL with Ted Vicknair to discuss not only protecting your assets while they are in your hands, but also protecting your bequest to your children. Don’t leave your children without an inheritance due to bad planning.
Reference: Parents (July 7, 2021) “Wills and Trusts for Adult Dependents.”