Estate Planning for New Parents: Why You Should Consider a Trust if You Have Young Children

Estate Planning for New Parents: Why You Should Consider a Trust if You Have Young Children

Becoming a parent changes your life in every way. It’s a journey filled with joy, love, excitement, and a healthy dose of stress and exhaustion. As you navigate sleepless nights, diaper changes and temper tantrums, this milestone is also the perfect time to consider something that might seem a bit distant amidst the chaos: estate planning. While it may not be the first thing on your mind, having a solid plan in place is crucial, especially when you have young children.

The Importance of Estate Planning for New Parents

When you have children, your estate plan takes on a whole new level of importance. It’s no longer just about what happens to your assets; it’s about ensuring the well-being of your partner and children if the unexpected happens. A comprehensive estate plan can:

• Designate a Guardian: If something happens to both parents, who will raise your children? Your will allows you to name a guardian, giving you peace of mind that your children will be cared for by someone you trust.
• Provide Financial Security: How will your children be financially supported in your absence? Your estate plan can ensure they have the resources they need for their upbringing, education, and future on the specific terms that you set.
• Minimize Family Disputes: Clear estate planning can prevent potential conflicts among family members about how your assets should be distributed and how your children should be raised.

Why New Parents Should Consider Trusts

While a will is a fundamental part of any estate plan, a trust offers additional critical benefits, especially for parents of young children. A trust is a legal arrangement in which you (the grantor) transfer assets to a trusted party (the trustee) to hold and manage those assets for a third party (a beneficiary) according to the trust’s terms and in the best interest of the beneficiary. Here’s why you should consider a trust:

• Managing Assets for Minors: Children cannot legally manage significant amounts of money until they reach adulthood. A trust allows you to appoint a trustee to manage assets on their behalf, ensuring the funds are used wisely for their benefit. The trustee will have to distribute the assets according to your instructions.
• Staggered Distributions: You can set up your trust to distribute funds to your children at specific ages or milestones (e.g., upon reaching 25 or 30 or upon graduating from college). This approach provides financial support over time and prevents young adults from suddenly receiving a large sum of money before they are mature enough to handle it.
• Avoiding Probate: Probate is the legal process of validating a will, which some people may want to avoid. Assets held in a trust typically bypass probate, allowing them to be distributed more quickly and privately to your beneficiaries.
• Providing for Children with Special Needs: If your child has special needs, a trust can be tailored to provide for their ongoing care and support without jeopardizing their eligibility for government benefits.

What to Consider When Setting Up a Trust

If you decide to set up a trust, here are some key considerations:

• Choosing a Trustee: Select someone you trust implicitly to manage the assets responsibly and in the best interests of your children. This could be a family member, a close friend, or a professional trustee.
• Defining Distribution Terms: Clearly outline how and when the trust assets should be distributed to your children or the beneficiaries you designate in your trust. Consider their needs, future goals, and potential for financial responsibility.
• Regularly Reviewing Your Plan: Life changes, and so should your estate plan. Regularly review and update your will and trust to ensure they reflect your current wishes and circumstances.

Taking the time to establish a solid estate plan with a trust can provide invaluable peace of mind, knowing that your children will be protected and cared for, no matter what the future holds. It’s an act of love and responsibility that will benefit your family for years to come.

(Pictured above: Firm Owner Aaron Frankel with his wife and daughter)