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Trusting Your Children
From the very first moment, you have been committed to taking care of your children. But what happens if you are not around?
Of course, you can just leave your children -- or your grandchildren -- all the money in your bank account and make them the beneficiaries of your life insurance policy. But what if they are still young when they inherit? Small children obviously are not capable of deciding how to spend such an inheritance.
Even older children might need some guidance. For example, you probably want to ensure that your children have the money to go to college. But if they inherit at age 18 or 20, they could decide to buy a Corvette or go to Tahiti instead.
A trust might be a good option. If your financial situation is more complex, you can use a more complex trust to accomplish estate-planning goals such as reducing taxes. For many people, though, a simple trust will work.
It is important to note that trusts are not only for the very wealthy. In fact, families with more modest means might find it even more important to try to ensure that their children do not waste their inheritance.
You can set up a trust as part of your will. Many people do both at the same time, although you can create a trust later on. In any case, you will need a lawyer to draft the trust agreement, and it is best to work with an attorney who is experienced in estate planning.
Before you hire a lawyer, though, think through your decision. For example, decide the age at which you want your children to inherit. Think about what kind of restrictions, if any, you want to make on their inheritance. For example, you could require them to wait until they are 25 years old, or you could provide that they receive part when they are 21 and part later. You also could require them to use the money only for tuition, for example. However, be careful not to be too restrictive, in case things happen that you do not anticipate.
You also need to choose a trustee to make sure that the money is distributed according to the terms of the trust. Many people choose a relative or close friend to act as trustee. You also can choose a bank or a lawyer, although that would involve a fee.
Especially if you choose a friend or relative, talk to them about their role as trustee. Explain how you hope your children would use their inheritance. Discuss the values you hope to emphasize. Make sure the person you trust is willing to accept the responsibility.
Then you can rest easy, knowing that no matter what happens, your children will have the money they need to realize their dreams.