Estate planning with multiple children can quickly get tricky, as most parents try to allocate money and assets equitably among their children. For parents with minor children, determining who to leave money to and how much becomes an even more important question—many parents opt to leave money or establish a trust for their child’s guardian to help with educational and other expenses.
An experienced estate planning lawyer usually recommends creating your estate plan based on your current situation, not on how you think your life will look in a few years or decades.
Per the Texas Estates Code, you have multiple options for leaving money to your children, from directly giving money in a will to providing income from a trust to naming your children beneficiaries of life insurance policies or 529 plans. Your estate planning attorney can walk you through all the options.
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Options For Bequeathing Money To Your Children
The most common way to leave money to your children is to name them as beneficiaries in your will. But any conversation about leaving money, retirement plans, IRAs, or other property to our children should start with discussing age. While a child of any age may inherit, children under the age of 18 cannot legally control or manage their financial assets. In addition, if one or more of your children are under 18 (minors), you can also name a guardian for them in the will or a separate Declaration of Guardian form.
There is a belief that the child’s guardian controls any money left to the child. However, it’s important to know that it is not that simple. In Texas, only a guardian of the estate appointed by a Court can handle the child’s funds with court oversight; meaning the guardian of the estate cannot expend funds without court approval, and they must file annual accountancy with the court which can increase legal fees.
A better option which can be used is to provide for your children is a trust. A trust for your children can be created through your Will or you can create a revocable living trust for your own planning which contains language to create subtrusts for your children after your death. With a trust, you can determine what age your children will receive their inheritance outright or whether it should remain in trust for their lifetime.
You can even place real estate in a trust, such as a house for your children to live in. The trust owns the house, and the children can enjoy living in the home (with their guardian) and may assume ownership or control of the trust when they reach a certain age.
Wills and Trusts are the best options for leaving money to your children because you can control how much they receive and when they receive it. You can appoint someone to manage the money and other assets until the children can make responsible decisions independently.
However, these aren’t the only ways to provide for your child in your estate plan.
Other Ways To Leave Money To Your Children
You and your estate planning attorney may use a combination of estate planning tools, including a will and trusts, to bequeath money to your children. However, you can provide for them even if you don’t have many assets or much money to leave them.
Other options include:
- Retirement accounts: Many retirement accounts, like IRAs and 401ks, allow the account holder to name a beneficiary. Funds in these accounts pass directly to the beneficiary when you pass, bypassing probate and directly benefiting your child.
- Life insurance: Life insurance is intended to provide for those who rely on you financially and settle any outstanding medical debts or funeral costs so your family isn’t financially burdened when you pass.
- 529 plans: These are tax-advantaged educational savings accounts that allow for tax-free withdrawals for all educational-related expenses from kindergarten through college and graduate school.
For Retirement Accounts and Life Insurance, the age of your child is an important part of the discussion because as mentioned about a child under 18 cannot legal control these assets. Therefore, it becomes important to name your children as beneficiaries in a manner that allows a Trustee to collect the proceeds and oversee the retirement accounts.
Contact an Estate Planning Lawyer Today
Do you need help creating an estate plan to provide for your children? A estate planning lawyer can review your options and draft strong legal protections for your child, so contact a reputable estate planning law firm today.
