For many parents, a child’s high school graduation is a mixed blessing. One is able to see one’s child take the first steps into adulthood – and the first irrevocable steps away from the family home. The instincts to protect (and, maybe, to coddle) remain strong, even as one knows it’s best to allow children to assert their independence.
Kids go off: To summer vacations, to gap years, to college campuses. They return to do laundry and sometimes that’s about it.
Nevertheless, high school graduation is a time when parents can – and very much should – establish an estate plan to put safeguards in place that can protect one’s children in the long-term.
Protecting your family with an estate plan
Simply and broadly put, estate planning tools are the means by which individuals provide financial protection to family members in the event of one’s death or incapacitation. Such matters are not always pleasant to think about. Still, it’s important to do so.
In fact, such considerations are especially crucial for parents of college-age children. It may be the case that, when your child was born, you established an estate plan to name guardians for your kids in the event that a tragedy befell you or your spouse. As detailed in a recent article in The Huffington Post, such concerns are no longer relevant.
Instead, your considerations may now be mostly fiscal: What would happen if your child received a large lump sum of money? What happens if your child quits college? What happens if your child is (gasp) irresponsible with money? What happens if your child falls victim to a fraud or bad investment?
The benefits of trusts
Devising a trust is a potent way to offer ongoing financial security to your children (and any other individuals of your choosing). You might set up an inter vivos trust, which goes into effect while you’re living, or an intestate trust, which is activated on your passing.
The main reason trusts are so advantageous is because they let you dictate exactly how and when your assets will be distributed. For instance, instead of leaving your child a one-time inheritance, a trust can be structured to distribute your income over a long period of time. (i.e. Stipulating that the child received 25 percent of the designated assets every five years for 20 years.) Likewise, you can devise a trust that distributes funds as needed for necessary expenses – such as health care or education.
Moreover, trusts are often able to preserve the worth of your assets. Trusts can be devised in such a way to reduce tax burdens, and are often off-limits to creditors who might otherwise be able to seize your assets before they pass on to your children.
All of this is to say, such trusts and other estate planning tools can be crucial for parents who are looking for ways to make sure their children remain supported as they depart from home.
They’re going to go off into the world alone. But that doesn’t mean they have to go off without help.