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Majoring in Minors b y K i m b e r l y Wa t s o n S e w e l l a n d F r a n k l i n H . Wa t s o n
D o you have minor children (i.e., under the age 18 in most states)? If you do, then your calendar is likely filled to overflowing with their school commitments and extra-curricular activities. Besides time, all of these commitments and activities require money... and lots of it. Since your children are worth the investment of both your time and your money, what plans have you made for them in a world without you? What would happen if your children were orphaned today? Back-up Parents Who would you entrust with the responsibility of rearing your minor children to adulthood? By default, any surviving parent will be the legal guardian (i.e., back- up parent) over your minor children. However, in the event there is no surviving parent, you must legally appoint the guardians of your own choosing or a court will make the appointment for you. When selecting guardians, most parents choose to appoint family members or friends with whom they share common principles, values, and religious beliefs. Inheritance Managers As with guardians for your minor children, unless you legally appoint the inheritance managers of your own selection, a court will make the appointment for you. Accordingly, you should legally appoint them because a court would likely appoint the guardian to serve as the inheritance manager too. Very few divorced parents want their ex-spouses to manage the inheritance left to their minor children. Common candidates for this role include trusted family members or friends, professional inheritance managers (i.e., trust companies), or combinations of the two. [Note: It is prudent to get permission from your intended back-up parents and inheritance managers, as well as their alternates.] Common Concerns Once you have appointed appropriate inheritance managers, you still need to protect the inheritance both for and from your children. There are three common concerns that can be hazardous to your wealth. Divorces First, the divorce rate has never been higher and blended families today outnumber original nuclear families. Second, lawsuits and bankruptcies are setting new records. Last, but not least, ambition-killing affluenza is always a concern whenever someone inherits
wealth for which they did not personally work. Depending on how the inheritance is left to your children, it can either be a blessing or a curse. Squandering Without proper estate planning, your children will receive their full inheritance upon reaching legal adulthood (i.e., upon reaching age 18 in most states). Will their inheritance be taken by a subsequent divorce, lawsuit, or bankruptcy? Will it be converted into fast cars and extravagant trips, rather than college educations, first homes and seed money for a small business? Because of these concerns, some parents create plans that distribute the inheritance outright at staggered ages (e.g., one-half at age 25, with the balance at age 30), once their children gain some life experience and maturity. While this is better than a full, outright distribution, it does not offer the maximum inheritance One of the greatest inheritance protections may be achieved by the formation of a Long-Term Discretionary Trust to administer the inheritance for your children. Such an arrangement can make both income and principal available to your children for their health, education, maintenance and support, as well as for any purpose deemed appropriate in the discretion of your appointed inheritance managers. Properly drafted, a Trust may serve as an estate plan within an estate plan. How? Upon the death of your children, the inheritance can continue for their own children. If they have no children, then the inheritance can continue for their siblings...without any unpleasant and unintended consequences. As you can see, planning for minors is no minor matter. Ask Yourself... These Questions Regarding Majoring in Minors. 1. Have I appointed legal guardians (i.e., back-up parents) for my minor children to rear them in a manner consistent with my principles, values, and religious beliefs? 2. Have I appointed inheritance managers of my own choosing to administer the inheritance for my minor children according to my goals for them? 3. Do I understand the risks of providing my children with their full inheritance upon reaching legal adulthood (i.e., upon reaching age 18 in most states)? protection available. Using Discretion
Kimberly Watson Sewell and Frank Watson
4. Do I understand the risks of making an outright distribution of an inheritance? 5. Have I created a Trust as part of my estate plan to protect the inheritance of my children from divorces, lawsuits, bankruptcies and unintended consequences?
For more information, please contact: Watson Sewell, PL (850) 231-3465 or www.watsonsewell.com
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