When children need trusts

| Nov 1, 2018 | Trusts |

Wills are usually the obvious and easiest part of estate planning. In certain circumstances, however, trusts should be created for children in Michigan.

A trust is recommended when a child is a minor. A minor child is unable to receive an inheritance or benefit directly. When this occurs, the executor would have to hire an attorney and ask a court to appoint a representative for the minor child in the court proceeding and a financial consultant to manage the money for the child’s benefit. The court may appoint an attorney who is unfamiliar with the family.

Children with issues such as drug and alcohol addiction may benefit from trusts. Even though creating a trust costs time and convenience, it is preferable than giving a gift outright to someone who may squander it. This also applies to children who cannot manage their finances or are unmotivated. Having a family member or trusted friend serve as a trustee without compensation is one method to defray the costs of trust administration.

Avoiding the pitfalls of immaturity, lack of experience or personal shortcomings helps protect assets that can be used to pay for the child’s education or career. This can provide financial stability for their family.

A large estate is another good reason to create a trust. These can be drafted to help prevent a successful lawsuit against the beneficiary. It can also avoid a divorcing spouse’s claim against its assets. These trusts may also avoid some tax liability. An attorney can help create a trust that meets these needs.