Posted on: 14 April 2021Share
Are you in the process of starting estate planning, but not sure if you need a will or a trust? This can be very confusing when you have children that are under the age of 18 since if you were to pass away prematurely there needs to be a decision about what happens with your assets. The two main ways to handle it are with either a will or a trust. It helps to know the main differences between these two estate planning methods so that you can pick the one that will work best for your needs.
The main thing to be aware of is that all of your assets are going to go through probate when you have a will. The guardian of your children will be the person that controls all of the assets for your children until they turn 18 years old. At that point, assets are going to be distributed directly to the children. This can be problematic for parents that do not think that their kids will be responsible enough to handle all of their assets in this situation, and would prefer some other form of estate planning is used to control how assets are distributed.
A trust will prevent assets from being distributed outright to the children, even after they turn 18 years old. This can help you set up the necessary distribution areas for your children so that they do not receive everything at once, since the trustee is responsible for making distributions according to your wishes.
For example, you can set aside part of the trust for education so that their college will be paid for. The trustee will then ensure that the money set aside for education is used only for education. You can also set terms and conditions on how that money is distributed as well. For example, it may be required that their grades are above a certain level in order to continue receiving money for their education.
Another benefit of using a trust is that you can establish an older age at which they will fully receive all of your assets. You may want to move that age until they are 25 or 30 years old to ensure that they receive it when they are more mature.
Reach out to your estate planning attorney for more information on the differences between wills and trusts and for help designing your estate plan.