Planning for your kids is so important – whether your kids are little or whether they are adults. Let me explain why I say that you love your kids too much to give them an inheritance outright.
Before I share my reasons, I would just like to give you some background for why we do what we do. As you may already know, our firm does estate planning, which is not just about death planning. We want to help people better understand estate planning and elder law issues.
These issues include doing asset protection from long term care expenses, and getting care without going broke in the process. It may not seem alarming, but often two out of three people end up needing nursing home care. This could be because they when get dementia or Alzheimer’s, according to the statistics available on longtermcare.gov some people are going to need long term care for more than five years.
We believe that estate planning is planning for where you are going to live. You also need to plan for how you are going to pay for somebody to take care of you if needed. It is not always possible for adult kids to take care of their parents. Often a caregiver is needed and this can be costly if you end up in a nursing home.
As our law firm has developed over the last decade, it has predominantly become an estate planning practice. Working with families of loved ones who are in a nursing home is part of what we do, but we also work with families who are planning for the future. Estate planning doesn’t just end when you pass away. Your estate plan will outlive you, because it is meant to honor your wishes for your family, after you pass away.
The challenge is that there are plenty of speed bumps in the road that could disrupt your plans. You may have this idea about living forever with nothing bad happening. When you pass away, you believe you only need to worry about giving your kids the bag of money. However, the problem with this scenario is that it is not realistic.
If you’re an adult and you have a job, you may also have a retirement account. If so, these types of accounts are all beneficiary designated. This means that a loved one would be a beneficiary, and would inherit the IRA when you pass away. If your child gets that IRA outright, it is now subject to their creditors, and potential divorce or lawsuit if it happens. This is because the money or account is in your name, which becomes subject to your kid’s issues when they inherit it. You also lose the opportunity to do good planning to protect the money from disabilities, divorce and lawsuits.
Whether you have adult children or minor children, giving them the inheritance outright is not the best decision. If a loved one in your family has a disability, the disabled person may lose all their benefits if they receive an inheritance outright. Other issues which could result in money being taken from families include taxes, the nursing home and divorce. These are the things our clients are most concerned about.
This is why we plan for all eventualities, and it is also why you can’t say, “All I need is a simple Will.” It is not as simple as leaving a bag of money which is divided by the number of kids you have, on the kitchen table. I hear it often that people are told by someone that they are not rich, so all they need is a simple will. If that were true, it would suggest that nothing bad will ever happen in our lives. When we die at the age of 95, we can leave money to our children who will have happy marriages. There also won’t be anybody with disabilities.
Shouldn’t we rather plan to live the real world, and plan for all eventualities? What would happen to that bag of money if it was left on the table and the house burnt down, or there was a tornado that destroyed everything? I am sure you would rather protect that money from any possible issues.
This is why we suggest giving the inheritance to your kids in a trust. Each kid will receive their inheritance in their own trust. We tend to do a lot of trusts in our law firm, because when you create a trust, and you pass away, the trust has the money in it and your kid is in control and has access to the money.
There is a law in Pennsylvania with a requirement for an inheritance in a third party testamentary trust to protect your children. Provided that the trust has a spendthrift clause in the trust code, the creditors can’t get to the money in the trust. This means that while the kids have control and can get access to the money, creditors can’t access it. This is advantageous because if the kid ever gets divorced, or they are sued, the money is beyond reach of those creditors. It just makes more sense and is probably a better way for your kids to receive the inheritance.
We realize that people don’t always understand their options, which is why we provide free education. This is what we teach you at our Three Secrets to Protect your Legacy Workshops. You will learn all about these different estate planning tools and you can decide what is right for you. Our promise is that you will make a well informed decision based on what you learn. We offer our workshops all around the Pittsburgh region, and you can register for a workshop here.
