It always shocks me the number of people I know who have young children and no estate plan in place. Many couples are correct to assume that if something happened to both parents, their children would be provided for but they never think about the cost.
A child cannot receive an inheritance outright, even from their parents, until they are over the age of 18.
What does that mean?
Well, basically they cannot just immediately receive the payout from a life insurance policy, bank account or even the proceeds of the sale of the family home. Any funds received from a parent by a child must be set aside in a trust until they reach adulthood and are able to access the funds directly.
Without a will, the minor child’s share of inheritance will have to be governed by the probate court and could significantly reduce the sums set aside to care for the child who just lost his or her parents. A guardian of the estate would need to be appointed and would have to report yearly to the court as to the condition of the child’s inheritance. The guardian would also have to be bonded (a type of insurance policy) which can also increase costs a great deal depending on the size of the inheritance. Even with a will, if not written to address any minor children, a guardian may still need to be appointed and a trust may need to be created by the probate court. The expenses for attorneys’ fees and court costs will be taken from the minor’s shares of inheritance, diminishing the amount of funds set aside to care for the children until they are old enough to care for themselves.
With an estate plan that creates a trust also appointing a trustee to manage your children’s inheritances, a great deal of frustration, money and time wasted could be avoided. Having a plan in place for the worst case scenario guarantees that your children are cared for by people you trust and that everything you intended to leave them is kept for them rather than being spent on avoidable expenses.