Do People Have An Idea Of Who Their Beneficiaries Will Be In An Estate Plan?
Most people have a clear idea about who the beneficiaries will be when it comes to leaving their assets in their estate plan. What they do not have a clear idea of is how they want to leave it to those people, and the kind of protection and the various mechanisms that the law has in determining how you would leave it to someone to best satisfy your objectives.
What And When Should You Tell Minor Children About Their Inheritance?
There is no hard and fast rule as to when to tell minor children about an inheritance. I have many clients who do not like to talk too much with their children about what they have, and what they are going to inherit. They do not want to disincentives their children. If their children find out that they are going to be receiving enough to live on, then they think they will not have to work anymore. At some point in time, I advise clients that they should tell their children how they have provided for them after they are gone, because the one thing that will cause family conflict and resentment the most, are surprises the children were not expecting to see.
What Are Some Common Mistakes Made When Setting Up The Children’s Inheritance?
The biggest danger that I have seen is that the parents have never set up the children’s inheritance, and started any planning whatsoever, meaning they left that to the state law which may or may not leave assets the way the parents would have wanted them to. The next biggest dangers after that are leaving it to children in a manner in which it is not protected and most likely to be frivolously dissipated before it should be.
What Is The Best Way To Protect The Children’s Inheritance?
By far, the most prudent way to leave assets to minor children is to leave those assets to them in a trust with a responsible trustee, who has been named the authority to watch over these assets, and properly invest, and expend the assets for the children as they should be.
Can Additional Measures Be Taken To Safeguard The Inheritance Of Young Adults?
Yes, there are safeguards to protect the inheritance of young adults. Again, the best way to protect assets for children regardless of their age who have not reached a degree of financial maturity where the children can be responsible to manage the assets on their own, is to leave those assets in a trust with a responsible trustee who can make sure that those assets are properly managed and expended. Just until the children have reached an age of financial maturity.
Are There Any Special Requirements For Children When Setting Up A Trust?
Any trust has certain requirements by law that needs to be in the trust to properly work. In the trust it names the parties that are going to be the trustees who have the responsibilities for managing all the assets. The trust needs to name what investment powers the trustees will have, so that the financial institutions will allow them the flexibility to invest those assets in the same manner that you can invest while you are still living. The trust needs to state what the provisions are used for, and how they are to be expended for the children and when the children may take control of them.
Are There Any Assets Or Property That Cannot Be Passed On To The Children?
Generally, the answer is no. Almost anything that you own you can transfer during your lifetime, which is almost all of your property, and this can also be transferred upon death. For example the types of things that will not transfer at death, is a pension that you would receive when you retire from where you were employed, and under the terms of the pension, it is payable to you for life or to you for life, and then to your spouse for life, but when both husband and wife are deceased, the pension stops.
Are There Any Special Requirements when It Comes To Passing On Retirement Accounts?
The special requirements when it comes to passing along retirement accounts relates to the tax consequences that retirement accounts have that are not applicable to other assets. With retirement accounts, because you did personally pay income tax on those during your lifespan, they are known as tax deferred. When you pass your retirement accounts onto the beneficiaries, the beneficiaries have to pay the income tax. There are a variety of ways you can leave them to the beneficiaries.
In some ways, the beneficiaries have to pay the tax immediately if a different path is chosen. They can be passed to the beneficiaries so that the beneficiaries only have to take a minimum distribution each year over their life expectancy, while deferring income tax on what they do not have to take. So the special requirements here is coming up with provisions for how you are going to leave your retirement plans which give the beneficiaries the best income tax deferral advantages.
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