While it may be awkward or uncomfortable to consider your own mortality, if you have minor children, it is important to think about their protection and well-being. An estate plan can help shape the course of their lives if you are not able to do so yourself. However, it is just as important to consider when your children will inherit as it is what your children will be inheriting.
You probably sought out this article hoping there is a one-sized answer to this question: what age should my child receive his/her inheritance? Continue reading and you’ll see that the answer is it really depends. We know that feels like a completely unhelpful answer, but as you’ll see below there are so many factors to consider.
In most states, including Georgia, a person legally reaches adulthood when they turn 18 years old. That means that without specific planning in place, they can inherit any money, property, or other assets from your estate at age 18. But an 18-year-old inheriting a lump sum of money may not be what all parents want. Remember back to when you were 18… do you think it would have been wise to inherit a large sum of money or significant property at this age? While most states determine adulthood to begin at age 18, fortunately, there are a few options for mapping out that inheritance that can give you peace of mind for if the unthinkable happens.
Planning ahead for your children is one of the most loving things you can do for them. Every family and situation in unique. Every child is unique. It’s important to know your options and plan well. Below we’ll discuss some of the most popular options in estate planning for child inheritances.
Georgia Child Inheritance & Estate Planning Options
While your children can inherit through your Last Will & Testament, if you want to control how and when the money is distributed – then the most common way to do that is with a trust. A testamentary trust, for example, is created in a person’s will and does not take effect until the person passes away. At that point, the executor will handle the probate process and distribute the assets according to the terms of the testamentary document. are designed to accomplish a specific estate planning goal, such as preserving assets for children. If the beneficiary is a minor, a trustee will help manage the funds until he or she reaches a specified age.
Another option is a revocable trust or a minor’s trust, which is separate from a will. With these arrangements, the person creating the trust names a trustee (usually another relative or close friend) who will manage the assets for the child until they reach a specified age. Or, if the child is already at that certain age when their parent passes away, the trust assets will go directly to them. With this type of trust, the children’s financial needs can be accommodated while the assets are also protected from the court, creditors, or irresponsible spenders.
One of the benefits of a trust is that the person creating it (the parent) can put in specific language related to the distribution of the money, property, or other assets. For example, the trust may have instructions for the trustee to distribute assets in segments, like when the beneficiary turns 20, 25, and 30. Or, the person creating the trust can stipulate that the beneficiary cannot receive any of the trust funds until certain events take place, such as college graduation, full-time employment, etc. Another way to structure the trust is to allow for distributions for certain expenses (ex: college tuition, purchasing a home, starting a business, paying for a wedding, etc.). Other parents have elected to create an incentive-style trust that matches the child’s income. If the child earns $5,000 a month, the trustee will distribute $5,000 a month from the trust, and so forth. A parent can also include language about incentive distributions if their child is involved in a non-profit or other charitable organization.
While there are numerous types of trusts and even more ways to manage the distribution of those trusts, it is important to consider which options will work best for your unique family situation. With inheritance planning, you want to think about the size of the estate, how inheritance may impact your child, and how financially responsible he or she may be. Many of these factors are tied to the child’s age at the time of inheritance, as well as their financial needs at that time.
Additionally, choosing the right trustee is equally important. This person, or entity, is the one in charge of distributing the funds or assets as the trust instructs. Filling this role with someone who is trustworthy and has your child’s best interest at heart is deeply important.
Trusts for Children Aged 12-years and Younger
At this stage, it may be too soon to tell whether your child will become a financially responsible adult. Who you choose as the child’s trustee is extremely important, as they will be managing the trust funds and overseeing the child’s financial future. Consider creating a lifetime trust or a trust that distributes through the child’s early adult years – until they have a good understanding of how to manage themselves and their financial health.
Trusts for Teenagers and Young Adults
Once your child reaches their teenage years, you will have a better idea about their maturity, spending habits, and their general direction in life. Still, many teens and young adults are not prepared to handle a large sum of money at a young age. To deter excess spending and to encourage certain life choices (ex: graduation, starting a business, purchasing a home), a parent might consider creating a trust with multiple disbursements based on age or life events.
Trusts for Mature Adults
At this age, a child is likely financially independent and making their own choices as it relates to their family, business, and home. If you feel your adult child is responsible with their money, you might consider creating a trust that gives them an inheritance outright. Or you can choose to spread out the disbursements, so as to protect your children against divorces or creditors.
Have Additional Questions about Georgia Child Inheritance laws? Contact the Estate Planning Team at Siedentopf Law
As with many aspects of estate planning, creating an inheritance trust for your child is a balance of protecting their basic interests while also providing them the means to grow and prosper. Having a skilled attorney guide you through this planning process gives peace of mind. A good guide and advocate knows which questions to ask and which tools best address your concerns. We know that you only want what is best for your child and we can help you achieve that through good estate planning.