By Angela M. Ward, Attorney
Parents with dependents have particular concerns when creating Last Wills and Testaments. They must assign a guardian, think about their child’s future expenses, and format inheritances to ensure the child gets the financial support they need when they need it.
Additionally, some parents want to create financial contingency plans in case they pass before their child reaches age eighteen. Other parents want to provide ongoing care for a special needs child or dependent.
For these parents, Trust Funds, Special Needs Trusts, and Minor Trusts offer practical advantages like protecting assets and controlling when and how assets are distributed. While many people assume that Trusts and Trust Funds are primarily utilized by the wealthy, they can be effective legal tools for parents at any income level.
Trust Funds as Estate Planning Tools
Sometimes parents want to ensure their children get their inheritances at the right time and that the funds are used in specific ways. In these cases, Trust Funds offer an Estate Planning tool that ensures assets are distributed according to the deceased’s wishes, on a schedule, and even contingent on activities or achievements.
Trust Funds can manage the distribution of all kinds of assets, including the proceeds from the sale of a home or vehicle, retirement savings such as 401(k)s and pensions, life insurance policies, and even personal property such as furniture, artwork, or heirlooms.
Trust Funds set rules for how and when assets are inherited. For example, if a person wants to ensure a child has the funds to cover college expenses, they might stipulate that certain funds can only be used for education. Other parents want to withhold some benefits until a child is old enough to manage them responsibly. In these cases, they might distribute certain assets or amounts at set intervals, such as at age eighteen, twenty-five, or thirty.
Trust Funds are one of the most flexible Estate Planning tools, allowing grantors to include a range of assets in a fund and distribute those assets in particular ways, at intervals, with conditions attached.
Minor Trusts
Minor Trusts are similar to Trust Funds. Parents primarily use them to protect a beneficiary’s financial interests until they become adults. This type of Trust can hold and distribute property or assets to minors under eighteen, safeguarding the funds from mismanagement by the children, their family, or their guardians.
Minor Trusts usually include guidelines for guardians. For example, they may approve funds for the use of food, clothing, and education but restrict spending on vehicles or vacations. These legal tools are designed to prohibit guardians from spending the child’s inheritance in unintended ways.
Because a Minor Trust is created to protect a child’s interest, it’s essential to specify the terms, including acceptable uses of the funds, a percentage to compensate the guardian for their duties, and the process for requesting funds from the Trust in exceptional circumstances.
Special Needs Trusts
Families with special needs dependents face unique challenges. If both of the parents pass, that dependent may need a guardian who can provide lifelong care. Additionally, parents may want to ensure that federal aid, such as Supplemental Security Income and Medicaid benefits, continues.
In these situations, creating a Special Needs Trust allows caregivers to hold bequests and assets in the Trust, allowing a trustee to spend the money on the dependent’s behalf. However, since the inheritance goes to a Trust instead of an individual, it is not considered income and will not jeopardize state or federal benefits contingent on a limited income.
Trust and Estate Planning Attorneys
A solid Estate Plan is vital to protect your assets and ensure your dependents are cared for when you are no longer around. One crucial element of Estate Planning is setting up a Trust. The Law Offices of Going and Plank in downtown Lancaster have extensive experience creating, reviewing, revising, and administering Wills, Trusts, and estates. Contact us today to talk about your Will, Trust, and Estate needs.
Want to learn more about Wills, Trusts, and Estate Planning? Check out these articles.
The Importance of Making Legally Sound Guardianships
When Should Families Create Wills and Trusts?
9 Things to Consider When Creating a Last Will and Testament in Pennsylvania
Power of Attorney: Learn What it is, Why You Need it, And What’s Different in Pennsylvania
