I was watching a rerun of one of my favorite TV shows, Jon and Kate Plus 8 (it's a reality show that follows a couple with twins AND sextuplets). In that episode, they got a will done... I, the estate planning dork that I am, freaked out that my favorite show was doing estate planning. Anyway, I'm going to go into more detail about a topic that I've touched on in previous posts: Estate Planning for New Parents.
When I refer to estate planning, I'm talking about going beyond drafting a simple will and establishing more complicated mechanisms to deal with your property after your death. The most popular mechanism is a trust, which allows one person (the settlor) to give control over property to another (trustee) for the benefit of yet another (the beneficiary). Trusts can be used to reduce the tax burden on an estate. However, even those whose estates are small enough to avoid tax can benefit from the use of establishing a trust in their will. Perhaps the largest group is parents with young children.
In the event that both parents die before the children have reached adulthood, a trust can give direction to the guardians of the children as to how to best spend the parents estate for the benefit of the children. Also, with a trust, the guardian is not given free reign over the money. Rather a trustee handles the money according to certain purposes laid out in the trust. Additionally, if a trustee is mishandling the children's wealth, a court can review the trustees actions. Finally, with a trust, you can delay the child's outright ownership of the money beyond their eighteenth birthday. As one parent of a sixteen year old said when asked what he thought his child would do if he got a large amount of cash at eighteen, "My kid would party like a rock star."
In the case of parents with more than one child, the most widely used trust is a pot trust. A pot trust initially pools the money in a common pot for the use of all children. The common pot is used because not all children have the same needs growing up and some will need more resources than others. One might have disabilities, or another might have a shot at the Olympics. In this trust there are two ages to consider. You determine the age that the children receive their money, but you also determine at what age the pot is split into equal shares. While many people decide to give the assets to the children at age 21 or 25, those same people will split the pot when the oldest turns 18 so that their college education doesn't suck all of the money out of trust, leaving nothing for the younger siblings.
With any trust you can condition outright ownership of money on certain events, such as marriage or a college graduation. Jon and Kate on my favorite show came up with an interesting plan, giving outright ownership upon college graduation or upon reaching a certain age, whichever comes first. That way, the children have an incentive to finish college in a timely manner, without unduly prejudicing the children who took longer to finish college or choose not to attend college.
Whatever your wishes may be, working with a licensed attorney to include a trust in your will is a great way to responsibly provide resources for your children's needs. Additionally, a licensed attorney can assist you in an extremely important piece that shouldn't be overlooked... making sure that the named beneficiary of your death benefits is the trust, so that the trust is sufficiently funded.