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When is the Best Time for My Kids to Get Their Inheritance?

Posted by Neil Tyra | Sep 21, 2020

If you are like most parents, you want your estate to be evenly divided and given to your children if your spouse pre-deceases you. That is not necessarily set in stone; you can divide it up any way you see fit. But most people do follow the first scheme – by dividing their estate into even shares to give to their kids as their inheritance.

But what does that mean if your kids are minors and how does that affect your decisions regarding how to structure your estate plan? If you have a lot of wealth, your choices might be a little different than if you are a family of modest means. We will deal with the typical approach used by most regular folks.

First, it typically is never a good idea to give a large amount of money to a minor or young adult. In my presentations, I often show a photo of a red Corvette sports car and ask the audience if they know the significance of the photo. Most don't recognize that that is what happens when they give a big bag of money to a young person – the go and buy a red sports car. It's human nature. So, you might want to guard against it.

Underage Beneficiaries 

Most Wills include an inheritance provision for underage beneficiaries. This applies to any beneficiary of your Will that is under the age of twenty-one (21) years of age (described herein as the “Minor” regardless of the actual legal age of majority). The typical provision requires that funds destined for such a minor beneficiary be placed in trust and held for his benefit until he reaches the age of twenty-one. This is what we call a springing trust – meaning it does not come into being unless the beneficiary is a minor. If the beneficiary is over the age of twenty-one at the time of your death, then this provision is null and void and they would get their inheritance in accordance with the provisions of your Will. If such a trust is required to hold the funds and assets for the benefit of the minor beneficiary, then your Executor or Personal Representative would appoint a Trustee to manage the trust until the beneficiary becomes of age. During that time, the Trustee usually has fairly broad authority to use the funds in the trust for the benefit of the beneficiary in terms of his health, education, or general welfare. And at twenty-one, they would receive all the remaining funds in the trust as their inheritance.

Descendant Trusts

But what if you want more control over those funds or want to space the payments out over time? Perhaps you feel that your child lacks the maturity to handle receiving a significant inheritance. Or maybe you just want your kids not to get too much too soon. In this situation, we usually recommend that your Will create a Trust for each descendant of yours. Such a descendant's trust would be created by your Will and your Executor would appoint a trustee to manage the trust. The trustee might still have the broad authority to distribute funds to the beneficiary for their health, education, or general welfare as above. But the trust might be set up to distribute the balance of the funds in installments – oftentimes three payments. One after the child finishes college or turns twenty-two (22), one a few years later, and the final payment sometime around the age of thirty (30). Delaying payment from the trust past the age of thirty tends to be counter-productive. But you can structure these payments in any way you desire. In this way, you can control how and when your children receive the benefits of your estate.

If you want to know how to set up your estate to provide for your children after you are gone, check with an estate planning attorney like The Tyra Law Firm, LLC. We would be happy to assist you.

About the Author

Neil Tyra

Noel's Husband, Bernadette's Dad, Clark's Father – My Three Best Roles So who am I and what am I about? First I was Noel's husband. I'm married (38 years and counting) to a long time resident of Rockville whose family goes back three generations.

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