Leaving a Legacy to Your Child
- Posted in: Estate Planning
As an estate planning attorney and the mom of the wonderful "kid" in the picture, I meet a lot of parents with the same concern: they want to leave a legacy for their children, but they worry about the repercussions if the children are given too much financial obligation before they are mature enough to handle it. What these parents want is to be there as their children receive their inheritance, to give them the responsibility slowly, as they become ready. To gradually relinquish control as each child reaches various milestones which prove they are fiscally prepared.
Well, we can’t assure these parents that they will be around indefinitely to watch over their child’s financial education, but we can offer them a solution that bears a resemblance to a loving and cautious parent. The solution has two parts, either or both of which the client may choose to utilize.
The first is to specify an age at which a child may be co-trustee of his or her own trust. The child can then partner with a co-trustee of the parents’ choosing; this could be a close friend of the family, a trusted advisor, or even a corporate trustee. This gives the child the opportunity to get a taste of responsibility and begin making decisions, but with a safety net beneath them. When the child reaches a certain age (or alternatively, after attaining a goal such as graduation from college, or gainful employment for a specified amount of time), he or she may then become sole trustee of his or her own trust.
The second part of the solution is to give the child access to the trust principle itself in gradual increments. For example, the child may receive 1/3 upon graduation from college, another 1/3 ten years later, and the remaining 1/3 ten years after that. Of course the ages and amounts are completely up to each client, but the staggered distribution of assets allows the beneficiary to have a learning curve, something which may make the parents (and the child) much more comfortable.
At our office we understand that there is no substitute for parental involvement, but we can give our clients options that can help to establish a strong foundation for fiscal responsibility.