When you have a child, you likely understand that you are now responsible for them even if something happens to you. Becoming a parent is one of the most commonly cited reasons people give for finally creating an estate plan.
You can ensure that your children will have appropriate support if anything ever happens to you by drafting appropriate legal documents. However, parents may find it difficult to achieve their goals if they do not understand the different tools people utilize for estate planning.
It is common for people to use either a trust or a will as the primary instrument in their estate plan. Which is better for someone with young children?
Know what each document can do
Your will allows you to protect your children in two distinct ways. You can name a guardian to take over your parental responsibilities if you die. You can also designate specific property for your children to inherit, ranging from your home to your bank accounts. Those resources will help cover your child’s cost-of-living expenses after your death.
Still, many parents are acutely aware of how vulnerable a will alone may leave their children. Even someone that you trust and respect now could change their attitude toward your children when they become a daily responsibility. Having unfettered access to the inheritance can also be a major temptation for the guardian you choose.
A trust helps protect against financial misconduct. Naming someone other than the selected guardian as the trustee helps provide an additional layer of oversight regarding the use of inherited resources and the treatment of your children. You can limit what the guardian can you use trust assets for until your children turn 18. Including the right provisions in a trust will give you the final say and what happens with the property you leave for your children.
Many parents use both
You can potentially provide for your children with just a will or just a trust. For many families, a combination of the two will offer the highest possible standard of protection. You can use a trust to protect your most valuable assets and a will to name a guardian and designate the remainder of your property to specific beneficiaries.
Thinking carefully about your goals while estate planning can help you provide for the support and protection of your children if anything ever happens to you.