Last year, my wife and I welcomed our third child into our home. She is our first daughter, and I can tell that I already think differently about her than I do for my sons. I’m wrapped around that little finger, I suppose.
Of course, having a new child has caused me to again think about my own estate plan. Having young children, I carry pretty significant term life insurance. If my wife and I would die in an accident, we need to consider where these funds would go. Who would manage our kids’ lives and their finances until they are old enough to do it for themselves?
We have named guardians for our children in our wills. Most families think to do this. However, guardianships typically end at age 18, when the child reaches legal majority.
I love my kids, but that doesn’t mean that I would trust them at age 18 with their inheritance. PA law will usually appoint someone to watch over the money until age 21 or 25. That said, many of my clients think that age 25 is still too young to manage significant assets. I agree.
That’s why in addition to naming guardians of our children, we have also created inheritance trusts so that our trusted family members can manage assets for our kids until a later age. The life insurance is then beneficiary designated to go to these trusts rather than to the kids outright. In this system, we can ensure that our kids have access to money, but don’t have the authority to make “lotto winner mistakes” to blow it all.
Would you trust your kids to receive their inheritance at 18? How about 21? 25? Perhaps we should do some planning together.