The possibility of leaving assets outright to minor children may be the
greatest disadvantage of the simple Will. If the parents die while the
children are minors, a guardian must be appointed over the children's
inherited assets (and over the kids themselves), and this is a cumbersome
form of property ownership. E.g., the law might require division of an
asset, such as real estate, among the children, rather than holding it
intact. Remember, too, that guardianship usually ends at age 18 and assets
must then be distributed outright.
A Trust, on the other hand, might provide for distributions only at a
later age, once more maturity and financial responsibility have been
developed. Until then, almost unlimited flexibility can be achieved in the
management of estate assets with a Trust. This flexibility is desirable in
dealing appropriately with the unique abilities and opportunities (or
disabilities or illness) of each child, without requiring rigid equality
of spending over the years. This is the approach most parents take while
alive. (This ongoing, discretionary power to "sprinkle" or
"spray" money as needed can be useful, too, in providing income
for a surviving spouse, while protecting the principal of the estate for
your children from a previous marriage.)
BEWARE ! But watch out if your Trustee might also a beneficiary! E.g.,
Oldest daughter becomes Successor Trustee, after Dad becomes disabled. If
the Trust gives the Trustee broad discretion to "sprinkle"
income, all that income might be taxable to her, personally - even if she
never actually "sprinkles" herself a dollar!
TIP: The Trustee should be specifically empowered to
"assist" a child's guardian, e.g., by adding a bedroom to the
guardian's house, or buying a bigger car. These are things that,
obviously, benefit the guardian, in addition to the child. Therefore,
without this authority, the Trustee might be uncertain about whether such
reasonable expenditures were, in fact, permitted by the Trust document
With a Will, in contrast to a Trust, the Executor's management ends
with his final report to the court, soon after completion of his legal
duties. So, many simple Wills provide that when both parents are gone,
everything is distributed outright, equally among the children. Never mind
about their actual needs. With a Will, the way to be "fair" is
usually to just be "equal," because it is written in stone.
Unfortunately, though, nobody can tell what the future might bring.
Probate court supervision over sales, investments and accounting after
death can be reduced or eliminated if, at the time of death, assets are
already held in a living Trust. This factor can save time and expense,
Michael T. Palermo, Attorney at Law; Certified Financial Planner, presents
a Crash Course in Wills and Trusts on the internet at www.mtpalermo.com/index.htm.
Further reproduction by writtern permission only.© 1996 Michael T.
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