Estate plans are very important for many different reasons. Typically, an estate plan includes a will or trust, a power of attorney and advance medical directives. But, for a young family with small children, there are other distinct issues that should be addressed in an estate plan. The primary concern becomes, what will happen to the children if the parents were to die simultaneously. Couples with minor children need to take special care to plan for this unfortunate event.
Who will care for the minor children?
Have you considered who will care for your children if you and your spouse died simultaneously? Whether in a car accident, plane crash, or some other unforeseen tragedy, your minor children may be left with no one, and the state may have to step in. Without your guidance, there is no guarantee that they will end up with the best person to care for them.
If you want to have a say in who that person will be, naming a guardian in your Will is the best way to establish your wishes. Nevada has special laws that allow you to appoint a temporary guardian while the Court approves the guardianship to ensure that your children do not spend a single minute in the custody of the State.
How will your estates’ assets be transferred to your children?
Without an estate plan, your child will inherit his or her share of both parents’ estate, to be held in an estate of the minor account under Nevada’s Uniform Act on Transfers to Minors. The guardian will be able to request distributions of the money in order to provide care for the child. Then, once the child has reached the age of majority in the state where he or she lives, the remaining assets of the estate will be distributed directly to the child. This would be true, regardless of whether or not the child is capable of managing the money.
Trusts for minor children
Parents can create a trust for their minor children, as part of their overall estate plan, which will hold any assets that are transferred to the children while they are still minors. There can be a provision in the parents’ will that creates the trust for the minor children, and also names the trustee to invest, distribute and manage the assets. This will be done for the benefit of the minor children, in accordance with the terms of the trust.
Typical distributions from a minor trust
The most common types of distributions from trusts for minors are for healthcare, education, general maintenance and support. Leaving assets in trust provides great tax benefits, asset protection, and divorce protection for your children throughout their lifetime. In Nevada, these benefits can be passed down to your grandchildren, great-grandchildren, great-great-grandchildren… for up to 365 years. Alternatively, the trust can be designed to terminate when the child reaches a specific age, not necessarily the age of majority. Another way to distribute the funds is by increments at specific ages. For example, the child can receive 1/3 of the trust at age 21, another 1/3 at age 30 and the final portion at age 35.
Overall, a primary goal of estate planning for families with small children, is to ensure that the child will be placed with an appropriate guardian and cared for financially until adulthood.
If you have questions regarding trusts for minors, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.