As you consider your estate planning, odds are that you just assume your children are going to be the main beneficiaries who get your assets when you pass away. This may not be the case if your spouse is still alive and they have a claim first, but you do think that the children will be the eventual recipients.
In some senses, this assumption is accurate. Children are your natural heirs and most assets will pass on to them. But there are some important questions that you need to ask.
How old are your children?
One of the first things to ask is just how old your children are. People often do not realize that their children cannot technically inherit as long as they are under 18 years old. New parents will try to make an estate plan where they name their newborn as the beneficiary who should receive all of their assets, but this is not possible. That child has to become a legal adult before they are able to own these possessions. You cannot leave your home or your investment portfolio to a minor.
So what should you do?
The key is to find someone else who can step in and help by managing those assets. They can then transfer the assets to your children when they come of age.
One example of a way to do this is to set up a trust. The trustee is then in charge of the assets, and they may even have allowances under that trust to use those assets to help your heir while they are still a minor. But the trust can also just hold the assets until your heir turns 18 – or whatever age you stipulate in the trust – and only then do they inherit the assets.
So, if you’re doing your estate planning very early in life, that is wise. It’s good to have this plan in place and it’s something that new parents do want to think about. But don’t assume that it works the same way as if your children were legal adults. Make sure you understand exactly what legal steps to take to accomplish your goals.