One of the primary purposes of putting together an estate plan is to make sure that your children are taken care of after you pass away. The passing of wealth to children can be done in a number of ways, and the best plan will depend on your circumstances and family dynamic. This article will provide a brief overview of your options.
Outright or in Trust – Which Option is Best?
The first thing you’ll want to consider is exactly how your children are to receive their inheritance. You have two options:
1. Outright: Your children will receive their share of your estate in a lump sum at the time of your passing.
2. In trust: Your children will receive their share of your estate via a trust, where another person can be appointed as trustee to oversee the distribution of assets over time.
Your decision in this regard is going to depend on a number of factors, including the age of your children, their financial aptitude, and whether there are any extenuating circumstances that might cause an issue if they were to suddenly come into a large sum of money. These issues can be wide ranging, from loss of government benefits to keeping assets out of the reach of creditors.
Inheritance via Trust – How Does It Work?
A child can receive an inheritance via trust both in the form of a last will containing a testamentary trust clause, or via a living trust that stipulates how wealth is distributed when the trust is created. Either way, the primary benefit to choosing this strategy is to provide some oversight as to how your estate will be handled after you pass away.
A simple example will help to illustrate how this works. Let’s say that you have passed away and one of your children has decided to commute to college, but needs a car. If you’ve decided to give your progeny their inheritance outright at the time of your death, then the choice of car is entirely up to them. If a Porsche or Ferrari catches their eye, no one can stop them from heading to the dealership and making the purchase, even if it would deplete a substantial amount of their inheritance.
However, if you were to have your children receive their inheritance via trust, things would go differently. Before any car can be purchased in this scenario, the funds will need to be made accessible by the trustee of their trust. What does that mean? It means they will need to seek that person out and get their explicit permission as to exactly which vehicle they can purchase. Hopefully, in this scenario you’ve chosen an adult with good financial management abilities who will review the trust assets and decide on a more sensible option for your child’s commuting vehicle. And if your child objects? That’s too bad; the legal authority to distribute the assets rests with the trustee, so long as he/sheacting in the best interests of the child, their decision will hold.
How Do I Decide?
Choosing how to structure your estate plan is a very personal decision that is going to depend on a number of factors including the value of your estate, your family dynamic, and your intentions for how you want the inheritance to be used. The best way to navigate these difficult decisions is by speaking with an experienced estate planning attorney who can guide you through this process and advise as to the best strategy for your circumstances. Our attorneys at Rosenblum Law are ready to assist you. Call us at (888) 572-3701 for a free, no obligation, attorney consult.
Watch our free webinar – Estate Planning in Accordance with Halacha: This webinar will provide an overview of how Jewish families can create an estate plan that follows their specific wishes while remaining in accordance with Halacha. Watch now by scanning the QR code below or visiting: www.rosenblumlaw.com/halacha-webinar
Rabbi Adam (Chananya) Rosenblum, Esq. is the founding attorney and principal of Rosenblum Law, which has provided over two decades of legal service to the community at large.
In addition to serving as principal of Rosenblum Law, he is involved in a number of volunteer and charitable endeavors, including mentorship, giving weekly Torah classes and running educational trips for Jewish outreach organizations.