Estate planning is important for adults of all ages, and it is an absolute must if you are the parent of dependent children who are relying on you for everything. Unfortunately, there is a shocking lack of preparedness among young adults.
According to a survey conducted by Caring.com last year, only 16.4 percent of people between the ages of 18 and 34 had estate plans. The number was 27.2 percent for individuals in the 35 to 54 age group.
Some people know they should have estate plans, but don’t understand how to set aside assets for minors, especially as many of them are short on resources.
In addition to the parents of young children, older individuals who want to leave inheritances to minors have similar concerns. We will look at possible solutions in this post.
Testamentary Trust
A testamentary trust is a trust within a will. This can be a good solution for young families. You embed the testamentary trust in the will and it takes effect when you pass away.
In your will, you name an executor to act as the administrator, and you designate a trustee for the testamentary trust. The same person can, but need not, assume both roles.
You could take out a life insurance policy and make the trust the primary beneficiary. If you pass away, the insurance policy proceeds will be used to fund the trust for the benefit of your children.
The trustee administers the trust according to the terms set forth when you created it. You decide when and if your children will be allowed to manage their own funds.
We are using insurance policy proceeds as an example, but other types of assets can be conveyed into a testamentary trust, such as a home or financial account.
Revocable Living Trust
Another option would be to establish and fund a revocable living trust. You serve as the trustee while alive and well, so you have total access to the trust resources.
After your death, the successor trustee designated in the trust declaration steps up and administers the trust. When you establish the trust, you determine at what age the beneficiaries receive the assets.
Custodial Accounts
The Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) are two legislative measures that allow custodial accounts for minors.
These accounts function the same with one major difference. Assets held in a UGMA account are limited to financial instruments such as cash, stocks, bonds, insurance policies, and mutual funds. An UTMA account can also hold real estate, collectibles, and other types of property.
When you establish the UGMA or UTMA account, You choose a custodian to manage it on behalf of the beneficiary until the age of majority. In Oklahoma, the age of majority for UGMA accounts is 21, and for UTMA accounts it’s 18.
Attend a Free Webinar!
We regularly conduct webinars to share key information about estate planning and nursing home asset protection. These sessions are free of charge and you don’t have to go anywhere to join us. We strongly recommend you take advantage of one of these webinars.
You can review our webinar schedule by visiting webinar page. When you identify the date that works for you, follow the simple instructions to register and reserve your spot.
Need Help Now?
If you are ready to work with an estate planning attorney to help you put a plan in place, we are here to help. Schedule a consultation at our Oklahoma City or Tulsa offices by calling 405-843-6100. You can also fill out our contact form if you would prefer to send us a message.
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