As they say..."there is more than one way to skin..." The same is true with leaving assets to your children. There are good ways, traditional ways, ugly ways and everything in between. Here are four of the most common ways to leave assets to your children.
1. Outright Distribution
Leaving money to your children outright is the most basic way possible. You have cash, the cash is handed to your children. You have a house, the house is retitled in the child's name. However, if your children are minors they cannot inherit outright and a conservator will need to be appointed by a court. Stay tuned for a future episode explaining the magical vanishing 18 year olds inheritance.
2. In Trust - Full Withdrawal Rights.
With this method, the assets are left to your children in a trust, but they are give full right to withdraw those assets for any reason. This method, much like outright distribution above, does not provide any way to make sure your child's inheritance with last.
3. In Trust - Stated Ages / Distribution Trustee / Income
This method is also left in trust, but with varying degrees of protection from waste. You can set it up so the child will get the income from the trust every year. You could give them access to the principal of the trust, but only with the approval of an independent distribution Trustee. There is also the method of allowing your children to withdraw a certain percentage of the trust assets at they reach certain ages - such as 25% at 30 years old, 50 at 40 years old and 100% at 50 years old.
This allows your children to with draw on an annual basis a stated amount or percentage of the trust assets. Something like 5% or $5,000.00
5. Bonus Method
Any combination of the four methods above. How you leave your assets to your children is very flexible. Often blending these methods together is the only way to reach your desired goal - this is one of the benefits of working with an estate planning attorney.
If you'd like to learn more about leaving assets to your children, please schedule a complimentary Strategy Session with me.