By Matt Van Heuvelen, as published in the April edition of ‘Hood Magazine a local publication celebrating child-hood, parent-hood, grandparent-hood, and all stages of family life. Find Matt Van Heuvelen’s article on page 39, and learn more about estate planning at Davenport Evans on page 41.
If you have young children, hopefully you’ve already considered a will. A will is something all individuals with children should have. But it may be a good idea to consider incorporating a trust, as well. After all, your net worth might be more than you think, if you consider assets such as your home equity, life insurance, and retirement savings.
There are a variety of ways to help your children manage your assets in the event you pass away. Which method you choose depends on the circumstances of your family. One possibility is something called a “testamentary trust” which means that your trust will be established after your death. To do this, you make a will and include your trust in your will. However, during your lifetime you are the owner of your assets, not the trust.
The terms of your trust include instructions for how your assets should be used after your death. You select the “trustee” who is responsible for carrying out the terms of your trust. The trustee manages the assets of the trust and decides how and when to use the assets. However, the trustee’s decisions must be consistent with your instructions. For example, you might direct your trustee to use the assets for the best interests of your children. Or, you might be more specific and direct your trustee to use the assets for your children’s health, education, maintenance and support. In any event, the trustee is legally obligated to manage and use the assets for the benefit of the beneficiaries of the trust (in this case, your children).
The assets do not have to stay in the trust forever. For example, you might determine that each of your children should receive half of his or her share at age 25 and the remainder at age 30. This strategy, or a similar one, will allow your children the time to mature before they get free reign over your assets.
People who are considering a testamentary trust need to think about who they would want to serve as the trustee. Typically, the trustee will be a close family member, a bank, or an investment advisor. If you are considering a testamentary trust for the benefit of your children, speak with your advisors to see if it is right for you. For more information, contact Matt Van Heuvelen at [email protected] or 605-357-1279. Find more Estate Planning resources here.
Davenport, Evans, Hurwitz & Smith, LLP, located in Sioux Falls, South Dakota, is one of the State’s largest law firms. The firm’s attorneys provide business and litigation counsel to individuals and corporate clients in a variety of practice areas. For more information about Davenport Evans, visit www.DEHS.com.