So you’re a grandparent now and want to give your young grandchild a gift to remember you by when you’ve passed on? So you plan ahead put a term in your Will to give the child some money, or you just add them as a beneficiary to your life insurance policy so the child can get the money without even having a will go through probate.
This approach can cause lots of headaches for your kids and grandkids.
- First, if you did it through your life insurance policy, most, if not all, life insurance companies will not simply give the minor a check. Instead, they will insist that a conservatorship or other protected account is setup for the minor. This often involves your child now having to go to court to setup the account for your grandchild and lots of expenses and the need to report to the court every year as to the status of the money.If you did this through your will and the money is in a bank account, banks will similarly require a protected account be setup for the minor.
This also can place you child in legal jeopardy if they fail to comply with the court’s requirements for the restricted account for your grandchild.
- Second, even if all these requirements are complied with, if you left money to your grandchild via a beneficiary designation or a will, there’s another problem: Once the grandchild turns 18 all the money is immediately theirs to be spent as they wish. No one can stop them from spending it as they wish, how they wish. If it’s a lot of money and the eighteen-year-old turns out to be not mature enough to handle their money on their own, expect to see your legacy squandered on some flashy trinkets rather than something lasting for them to remember and appreciate your generosity.
These problems can be solved by leaving money to your grandchildren in a trust.
Using a trust, you can appoint a trustee who will follow your instructions and schedule distributing the funds to the grandchildren based on the trustee’s assessment of their ability to handle the money and to ensure they get funds when they need them or when they demonstrate they can handle the responsibility. Trusts offer flexibility, typically do not require court supervision and related expenses, and can let you control the flow of funds to your grandchildren long after they turn eighteen.
Contact Kendal Law Group to discuss the creation of a trust so you can leave a lasting legacy for your grandchildren.