Revocable Trust for Minor Children
If you have kids around your house, you know how sweet life is around them. Their laughter and innocence brightens your day, and their love gives you a reason to be joyful. Children always offer a fresher perspective on life by looking at the world with their innocent eyes—often imparting wisdom in their naivety. You want to care for them forever, but you won’t be around until the end of time, will you?
When planning your estate, you may be wondering how best to transfer property to your child, grandchild, niece, or nephew’s name. You want them to have their share of your estate but you don’t want them to be irresponsible with it; especially if they are minors.
Of course, you want all this to happen seamlessly, without causing any trouble to your darling inheritor. To solve this problem, you can choose to create a trust for minor children.
Trust us; it’s not as complicated as it sounds. Read on to find out how a revocable trust in New York can be set up along with all its implications.
Why Not Transfer Assets Directly?
Well, as an attorney I can tell you that it is never a good idea to downright transfer property in a minor’s name. It is an easy way to change ownership, but its ramifications are worth considering. First, you cannot take for granted that a minor would act responsibly with so much money at their disposal. Children are highly impressionable and there is always a risk that they would become influenced by another adult.
The other important fact to remember is that minors are often limited by the law to take certain actions. For instance, if they have real estate in their name, property laws can intersect with estate planning laws and strip them of selling power. This is why it is best to always use a trust to transfer assets to minors.
Plus, with a revocable trust, there is the added benefit of being able to make modifications any time. If you ever feel like some changes are due, you can easily get in touch with your attorney and discuss the adjustments.
What Kind of Trust Is Best for Minors?
By definition, a trust is an agreement between three people: the grantor, the trustee, and the beneficiary. In this case, the minor child you want to transfer your assets to is going to be named a beneficiary—the ultimate receiver of the trust. You, the person who owns the assets in the first place, are the granter. Lastly, the trustee is another adult that you trust to manage the trust on behalf of the beneficiary just until the child reaches a certain age. As a granter, you must decide who will serve as the best caretaker of your beneficiary’s inheritance.
For minors, the best option is a Revocable Trust, which can include many conditions limiting how and when they can use the assets within. Depending on your needs, you can choose from a range of trusts with different structures based on your lawyer’s advice.
Benefits of a Revocable Trust for Minors
A further category of trusts is a living or revocable trust, which means that the assets transferred in the trust’s name can easily be changed and modified. Moreover, you can always add more funds in consultation with an estate planning attorney in New York. Other conditions depend on what kind of a trust you choose and what kind of assets you transfer into it.
A Revocable Trust in Action
As mentioned before, you have to choose a middle-person for the transfer of these assets. Let’s assume that Charles Lee’s is planning his estate. His granddaughter Sue Lee is 15 years old. Keeping her tender age in mind, Charles appoints his son as the trustee of the revocable trust and specifies that it can only be given to Sue when she is 21 and has graduated from college. This ensures that the estate is in safe hands, is being kept up-to-date with taxes (which we shall discuss in detail later), and that all important documents pertaining to this transaction are protected.
If you choose to go for the revocable trust, there are many financial benefits. For one, you can make annual transfers to the fund without paying excess tax on it. This can be either gift tax exclusion (only if the minor’s access to funds is immediate) or generation-skipping tax exclusion (if the beneficiary is at least 37.5 years younger than the granter). If the previous two don’t seem to work for you, ask your attorney about the Crummey Trust which can help you take advantage of the gift tax exemption while restricting the recipient’s access to the trust.
What Can You Add to a Minor’s Trust?
Well, frankly you can add anything into a minor’s revocable trust. We often tell clients that if they want to, they can put everything from their vacation home to their old gramophone into the trust and get away with it! Remember that there may be different tax implications for different assets but the bottom-line remains the same.
Estate planning can be a tough decision for anyone, and if children are involved, there is extra pressure to be responsible. You are the one who has to divide your assets between your loved ones and it can be frustrating to get into perplexing details about trusts and estate taxes. If you can relate to the feeling, we suggest hiring an attorney who specializes in estate planning. Setting up a revocable trust in New York is a piece of cake with the right help!
