One of the most common phrases we hear from younger families who are beginning the estate planning process for the first time is, “We don’t have a lot of money. We just need a simple will to name guardians for our children." With new expenses like diapers, car seats, and daycare to consider, a family with young children may not feel like they will ever have an estate worth leaving!
But even though you don't feel rich now, you might be overlooking a significant asset: life insurance. Massachusetts law gives your children access to their inheritance at the age of 18. That means your children would have full access to any life insurance and other estate assets or real estate inherited immediately after their eighteenth birthday. If you have a moderate to substantial policy, this could equate to hundreds of thousands of dollars! Do you remember where you were when you were 18? Would you have spent those funds wisely?
A simple family trust is a great tool for making sure the assets your children could possibly inherit are distributed to your children according to your wishes. By using a trust, you decide who will hold and manage the assets your children inherit. You can put restraints on when and how distributions are made. For example, you might structure the trust so that funds are primarily used for college, a first home, a wedding or any other major life event or achievement.
You can also set milestones for larger distributions. A common variation on that theme is to distribute 50% of the trust at age 30, with the remainder to be distributed at age 35. Regardless of the actual size of your estate, the inclusion of a trust in your estate plan will help ensure that your wishes are carried out and that inheritance is protected and preserved for your children.