King & Wood, P.A.

Beneficiary Battle over Presley Estate Reveals Possible Problems in Estate Planning

“A badly in debt woman dies leaving the proceeds of substantial insurance policies to her children only to have her trust contested by relatives who claim an amendment naming the children as beneficiaries is invalid with no witnesses, misspelled names, suspicious signatures and was never given to previous trustees for review as required by agreement. A long, expensive, and protracted legal battle likely is brewing.”

This is the situation facing the estate of Lisa Marie Presley, whose estate is being challenged by her mother, Priscilla Presley, as described in a recent article, “Presley beneficiary battle sets example of poor estate planning practices” from Insurance NewsNet. These situations are not uncommon, especially when there’s a lot of money involved. They serve as a teachable moment of things to avoid and things to absolutely insist upon in estate planning.

Lisa Marie’s estate is being challenged because of an amendment to the trust, which surfaced after she died. The amendment cut out two trustees and named Lisa Marie’s children as executors and trustees.

At stake is as much as $35 million from three life insurance policies, with at least $4 million needed to settle Lisa Marie’s debts, including $2.5 million owed to the IRS.

When this type of wealth is involved, it makes sense to have professional trustees hired, rather than appointing family members who may not have the skills needed to navigate family dynamics or manage significant assets.

A request to change a will by codicil or a trust by amendment happens fairly often. However, some estate planning attorneys reject their use and insist clients sign a new will or restate a trust to make sure their interests are protected. In the case of Lisa Marie, the amendment might be the result of someone trying to make changes without benefit of an estate planning attorney to make the change correctly.

The origins of the estate issues here may go back to Elvis’ estate plan. His estate was worth $5 million at the time of this death, $20 million if adjusted for inflation. His father was appointed as the executor and a trustee of the estate. His grandmother, father and Lisa Marie were beneficiaries of the trust. Lisa Marie was just nine when her famous father died, and her inheritance was held until she turned 25.

When his father died, Priscilla was named as one of three trustees. When his grandmother died, Lisa Marie was the only surviving beneficiary. She inherited the entire amount on her 25^th birthday—worth about $100 million largely at the time because of Priscilla’s skilled management.

Terminating such a large trust and handing $100 million to a 25 year old is seen by many estate planning attorneys as a big mistake. Distribution at an older age or over the course of the beneficiary’s lifetime could have been a smarter move. Lisa Marie reportedly blew through $100 million as an adult and was millions of dollars in debt, despite the estate having plenty of cash because of two large life insurance policies.

In 1993, Lisa Marie established a trust naming her mother and former business manager as trustees. The amendment in question seems to have been written in 2016, removing Priscilla and business manager Siegel as trustees, appointing Lisa Marie’s daughter and son as trustees, and naming her son and her fourteen year old twin sons as beneficiaries.

Priscilla’s attorneys say they had no prior knowledge of the change. Certain changes in estate plans require written notification of people with interest in the estate, which did not occur. They are also challenging the amendment’s authenticity, saying it was neither witnessed nor notarized. Priscilla’s name is misspelled and Lisa Marie’s signature is not consistent with other signatures of hers.

The estate is being contested, with a preliminary hearing on the matter scheduled for April 13.

Any changes to an estate plan, particularly those involving changes to the will, trusts or beneficiaries, should be done with the help of an experienced estate planning attorney. When large changes are made, or large assets are involved, a simple codicil or amendment could lead to complicated problems.

Reference: Insurance NewsNet (Feb. 17, 2023) “Presley beneficiary battle sets example of poor estate planning practices”

Presley Estate Battle Heating Up

“Priscilla Presley believes she should be in charge of daughter Lisa Marie Presley's estate. However, a legal document filed seven years ago suggests that wasn't what the singer-songwriter wanted should she die.”

Expect a lot of twists and turns as the Lisa Marie Presley estate gets addressed, as detailed in an article from yahoo! Entertainment titled “Priscilla Presley files to control Lisa Marie Presley’s estate despite Riley Keough being named trustee.”

Priscilla filed paperwork challenging the authenticity of an amendment filed in 2016 seemingly made by Lisa Marie removing her as trustee, and naming Lisa Marie’s adult children Riley Keough and son Benjamin Keough as successor co-trustees and removing Priscilla and her former business manager Barry Siegel. Benjamin died in 2020, so Riley would be the sole trustee.

In a document obtained by yahoo! entertainment, Priscilla asked a judge to determine the validity of the trust provision, claiming Lisa Marie’s signature on the 2016 document appears inconsistent with her usual signature. The amendment was never notarized and Priscilla alleges the document was never delivered to her as required by the terms of the 2010 arrangement. She says the date on the 2016 amendment is suspicious and it also misspells Priscilla’s name. Priscilla wants the court to reinstate the 2010 trust.

Priscilla believes Siegal has or will soon resign as a co-trustee of the trust.

According to the court documents, “In that event, Riley would become a co-trustee with Priscilla. And since Riley is over 30, she could act as a co-trustee of her sub-trust, once she signs a document consenting to act in such capacity.”

What Riley wants is unclear, but one thing is sure—there’s no way Lisa Marie would have Siegel anywhere near her property. She sued him in 2018 and accused him of negligence and mismanaging her finances. According to documents from the $100 million lawsuit, Lisa Marie claimed she only had $14,000 in cash in 2016. Siegel countersued and sought $800,000 in unpaid bills, claiming Lisa Marie spent all her money from her father’s inheritance on a lavish lifestyle.

Making things more complicated, Lisa Marie was in a contentious legal battle with ex-husband Michael Lockwood.

Priscilla is credited with turning Graceland into a huge commercial success for the family. Elvis’s former estate will go to Lisa Marie’s three daughters.

Reference: yahoo! entertainment (Jan. 27, 2023) “Priscilla Presley files to control Lisa Marie Presley’s estate despite Riley Keough being named trustee”

When Can Gifts or Donations Be Made for You?

“Many older adults enjoy giving money during their lifetime to family members or donations to a religious or charitable organizations.”

Grandparents may make a generous gift to a grandchild to help with college expenses or an adult child who is struggling. The size of the gifts is often directly related to the giver’s financial resources, life circumstances and their relationship with the recipient. However, this tendency toward generosity can come to a sudden stop if the giver becomes incapacitated, explains a recent article titled “Estate Planning: Gifts and donations by agents and trustees” from Lake County News.

Authority to make gifts can be included in a person’s trust to permit the trustee to make gifts using assets owned by the trust. A person’s power of attorney can be drafted to permit the agent to gift using assets owned by the individual if this gifting authority is expressly stated and authorized. It may not be implied based on a person’s past behavior or informal comments.

For example, a commonly used express giving provision in power of attorney is language like this: “The Agent is authorized to make gifts on the Principal’s behalf to the Principal’s children, any of their issue, or both, to the full extent of the federal annual gift tax exclusion…and for such purposes, to remove the Principal’s assets from any revocable trust of which the Principal is a grantor.”

This language, which must be created in alignment with state law, is an example of how the agent may be given discretion to make gifts to children and grandchildren, up to the annual federal gift tax exclusion per person. The agent may request assets from the principal’s trust to fulfill these gifts.

Giving should not be confused with a person’s legal duties of support to a spouse or dependent minor children. A Power of Attorney and a trust can be used to meet a person’s legal duty of support during the time of their incapacity.

Some people provide financial support to family members, which is not required by law.

For example, a parent may wish to pay a disabled child’s living expenses in coordination with any special needs planning. It’s extremely important in this situation for planning to be in place long before it is needed. If support is to continue when the parent becomes incapacitated, the parent’s estate planning documents must provide for continued support, otherwise the child will lose access to those resources.

An agent under a power of attorney and a trustee according to the directions of the trust document are both fiduciaries, meaning they are legal representatives with duties and obligations to put the interest of the individual ahead of their own.

Any action taken by the agent or the trustee must meet the standard of the fiduciary. The actions must be reasonable, in good faith and consistent with any instructions specified in the document. An agent or a trustee may not make imprudent or unjustified gifts which might jeopardize the financial welfare of the principal.

An important exception is if the agent or trustee is expressly authorized to gift assets in order to qualify the principal as eligible for needs-based government benefits.

There are many good reasons to make gifts during one’s lifetime. It is sometimess necessary for those gifts to continue during incapacity. Talk with an estate planning attorney to ensure that loved ones are protected regardless of what unexpected events should occur.

Reference: Lake County News (Dec. 31, 2022) “Estate Planning: Gifts and donations by agents and trustees”

Can I Protect My Family after Death?

“The future is uncertain. However, you can ensure that your family and loved ones are taken care of with estate planning. Estate planning is a critical component of financial planning for the future.”

Estate planning involves a close look at personal and financial goals while you are living and after you have died, as explained in a recent article titled “Professional Advice: Secure your future with estate planning” from Northwest Indiana Business Magazine. Having a comprehensive estate plan ensures that your wishes will be carried out and loved ones protected.

Your last will and testament identifies the people who should receive an inheritance—heirs—who will manage your estate—executor—and who will take care of your minor children—guardian. Without a valid will, the state will rely on its own laws to distribute assets and assign a guardian to minor children. The state laws may not follow your wishes. However, there won’t be anything your family can do if you didn’t prepare a will.

Assets with beneficiary designations can be passed to heirs without going through probate. Certain assets, like life insurance policies and retirement accounts, allow a primary and secondary beneficiary to be named. These assets can be transferred to the intended beneficiaries swiftly and efficiently.

Many people use trusts to pass assets for a variety of reasons. For example, a trust can be created for a family member with special needs, protecting their eligibility to receive government benefits. Depending on the type of trust you create, you might be able to eliminate estate taxes. Certain trusts are also useful in protecting assets from creditors and lawsuits, and ensure that assets are distributed according to your wishes.

Revocable living trusts provide protection in case of incapacity, avoid probate and ancillary probate and may provide asset protection for beneficiaries. If you are the creator of a trust—grantor—you will need to appoint a successor trustee to manage the trust if you are the original trustee and become incapacitated. Upon death, a revocable trust usually becomes irrevocable. Assets placed in the trust avoid probate, the court proceeding used to settle an estate, which can be both time-consuming and costly.

A Power of Attorney allows you to name a person who will handle your financial affairs and protect assets in the event of incapacity. That person—your agent—may pay bills, sell assets and work with an elder law estate planning attorney on Medicaid planning. The POA should be customized to your personal situation. you may give the agent broad or narrow powers.

Everyone should also have a Health Care Proxy, which gives the person named the legal right to make health care decisions on your behalf if you are unable to. You’ll also want to have a HIPAA Release Form (Health Insurance Portability and Accountability Act), so your agent can speak with all health care providers, access medical records and speak with the health insurance company on your behalf.

A Living Will is the document used to convey your wishes regarding end-of-life care if you are unable to do so yourself. It is certainly not pleasant to contemplate. However, it should be thought of as a kindness to your loved ones. Without knowing your wishes, they may be forced to make a decision and will never know if it was what you wanted. A Living Will also avoids conflicts between health care providers and family members and makes a stressful time a little less so.

Having a comprehensive estate plan provides protection for the individual and their family members. It avoids costly and stressful problems arising from the complex events accompanying illness and death. Every three to five years (or when life or financial circumstances warrant), meet with an estate planning attorney to keep your estate plan on track.

Reference: Northwest Indiana Business Magazine (Dec. 27, 2022) “Professional Advice: Secure your future with estate planning”

How Does a Trust Work?

“There’s no single path for everyone to follow. However, you might consider establishing a trust, which offers some key benefits.”

You’ve worked hard to accumulate financial assets. You’ll need them to support your retirement. However, what if you also want to pass them on to loved ones? Trusts are used to pass assets to the next generation and have many benefits, says a recent article titled “Passing assets through a trust—What to know” from the Daily Bulldog.

“Funded” trusts don’t go through probate, which can be time-consuming, costly, and public. Your last will and testament becomes a public document when it is filed in the courthouse. Anyone can see it, from people wanting to sell your home to thieves looking for victims. Trust documents are not public, so no one outside of the grantor and the trustee knows what is in the trust and when distributions will be made. A trust also gives you the ability to be very specific about who will inherit assets in the trust, and when.

An estate planning attorney will help establish trusts, ensuring they are compliant with state law. There are three key questions to address during the trust creation process.

Who will serve as a trustee? There are several key roles in trusts. The person who creates the trust is the grantor of the trust. They name the trustee—the person or company charged with managing the trust’s assets and carrying out the instructions in the trust. You might choose a loved one. However, if they don’t have the knowledge or experience to manage the responsibilities, you could also name a corporate fiduciary, such as a bank or trust company. These entities charge for their services and usually require a minimum.

When will distributions be made? As the grantor, you get to decide when assets will be distributed and the amount of the distribution. You might want to keep the assets in the trust until the beneficiary reaches legal age. You could also structure the trust to make distributions at specific ages, i.e., at 30, 35 and 40. The trust could even hold the assets for the lifetime of the beneficiary and only distribute earned income. A large part of this decision has to do with how responsible you feel the beneficiaries will be with their inheritance.

What is the purpose of the trust? The grantor also gets to decide how trust assets should be used. The trust could designate broad categories, such as health, education, maintenance and support. The trust can be structured so the beneficiary needs to ask the trustee for a certain amount of assets. Other options are to structure the trust to provide mandatory income, once or twice a year, or tie distributions to incentives, such as finishing a college degree or purchasing a first home.

An estate planning attorney will explain the different types of trusts and which one is best for your unique situation. There are many different types of trusts. You’ll want to be sure to choose the right one to protect yourself and your loved ones.

Reference: Daily Bulldog (Dec. 24, 202) “Passing assets through a trust—What to know”

What’s More Important: Estate Plan or Trust?

“Trusts and estates are the two main legal structures for transferring assets to your heirs and beneficiaries. Each works in critically different ways.”

A will makes a one-time transfer of assets after death, while trusts allow assets to be transferred during life and after death. Each one has an important role to play in managing assets and protecting loved ones, reports an article “Estate vs. Trust: Do You Really Understand the Difference” from yahoo!.

An “estate” in this sense is everything you own at the time of your death. It doesn’t include anything you own together with someone else as a joint tenant with rights of survivorship. It also doesn’t include any assets with beneficiary designations. These are assets transferred or otherwise assigned to pass to another person when you die. Your heirs are anyone who receives money, personal possessions, or any other assets from your estate.

Let’s say a woman named Penny dies. The home she owns with her husband is not part of her estate, since it now belongs solely to her spouse. Anything she gave away while living is not part of her estate. Her estate owns anything she independently owned at the time of her death.

An estate is a temporary legal entity existing only to make a one-time distribution of the assets of a decedent. Once the assets have been distributed, the estate is closed. This doesn’t mean estates are short-lived. Some estates take years to settle, depending upon their complexity and how well-prepared the estate plan was.

Estates are distributed in two main ways: by the will, also known as the last will and testament, or by the legal chain of inheritance. A will contains a set of instructions for who gets the assets of the estate. If the deceased has a valid will, the estate is distributed under these terms.

If there is no will, the person has died intestate and assets are distributed according to state law. Most of the time, this means assets go to the next of kin. In most states, spouses have the top spot in the line of inheritance, followed by biological children, then parents, then extended family. The spouse often gets one half of the estate and the children divide the balance.

A trust is a legal entity holding and distributing assets according to the directions in the trust. The person who creates the trust, known as the “grantor,” establishes the conditions and may give whatever they want, at whatever time they specify. A trust is independent of the people who create and fund it. Assets placed in the trust belong to the trust until they are distributed.

Let’s say a person named Edward wants to create a trust for certain family members’ college expenses. He could set up a trust with his estate planning attorney, then fund it with $6 million. The trust could be overseen by his attorney acting as the trustee. The trust names children, nieces and nephews as beneficiaries. They ask the trustee for money to pay college tuition, and the trustee handles the distribution.

The trustee has the job of making sure the monies are used in the manner prescribed by the trust. Therefore, in this case, the attorney may decide to only make distributions directly to colleges to pay for tuition. The trustee is a fiduciary and their first responsibility is to carry out the instructions in the trust.

Trusts can be set up while you are living and they can survive the creator’s death, unlike a will. When a person who has set up a trust dies, the trust continues until it runs out of assets or until its terms dictate it be dissolved.

Trusts and estate plans both exist to distribute assets. However, they do so in very different ways. Your estate planning attorney will guide you as to how these two entities work together for your unique situation.

Reference: yahoo! (Nov. 9, 2022) “Estate vs. Trust: Do You Really Understand the Difference”

Can You Prevent Family Fights over Inheritance?

“In early 2022, Bloomberg News reported that Americans can expect to inherit $72.6 trillion over the next quarter century—more than twice as much as a decade ago. With so much potential generational wealth on the line, there is always a risk that it will become the subject of a dispute.”

Inheritance battles can create new conflicts, inflame long-standing resentments and squander assets intended to make heir’s lives better. What can families do to prevent estate battles when a loved one’s intentions aren’t accepted is the question asked by the recent article, “Warning Signs Of Estate Disputes—And Ways to Avoid Them,” from mondaq.com.

Here are the more common scenarios leading to family estate battles:

• Siblings who are always fighting over something
• Second or third marriages
• Disparate treatment of children, whether real or perceived
• Mental illness or additional issues
• Isolation or estrangement
• Economic hardship

There are steps to take to minimize, if not eliminate the likelihood of estate battles. The most important is to have an estate plan in place, including all the necessary documents to clearly indicate your wishes. You may want to include a letter of intent, which is not a legally enforceable document. However, it can support the wishes expressed in estate planning documents.

Update the Estate Plan. Does your estate plan still achieve the desired outcome? This is especially important if the family has experienced big changes to finances or relationships. An estate plan from ten years ago may not reflect current circumstances.

Make Distributions Now. For some families, giving with “warm hands” is a gratifying experience and can remove wealth from the estate to avoid battles as everything’s already been given away. The pleasure of seeing families enjoy the fruits of your labor is not to be underestimated, like a granddaughter who is able to buy a home of her own or an entrepreneurial loved one getting help in a business venture.

Appoint a Non-Family Member as a Trustee. Warring factions within a family are not likely to resolve things on their own, especially when cash is at stake. Appointing a family member as a trustee could cause them to become a lightning rod for all of the family’s tensions. Without the confidence of beneficiaries, accusations of self-dealing or an innocent mistake could lead to litigation. Removing the emotions by having a non-family member serve as a professional trustee can lessen suspicion and decrease the chances of legal disputes.

Communicate, with a facilitator, if necessary. Families with a history of disputes often do better when a professional is involved. Depending on the severity of the dynamics, this could range from annual meetings with an estate planning attorney to explain how the estate plan works and have discussions about the parent’s wishes to monthly meetings with a family counselor.

A No-Contest Clause. For some families, a no-contest clause in the will can head off any issues from the start. If people are especially litigious, however, this may not be enough to stop them from pursuing a case. An experienced estate planning attorney will be able to recommend the use of this provision, based on knowing the family and how much wealth is involved.

Addressing the problem now. The biggest mistake is to sweep the issue under the proverbial rug and “let them fight over it when I’m gone.” A better legacy is to address the problem of the family squabbles and know you’ve done the right thing.

As we head into the holiday season, efforts to bring families together and prepare for the future will allow parents, children and grandchildren to enjoy their time together.

Reference: mondaq.com (Nov. 4, 2022) “Warning Signs Of Estate Disputes—And Ways to Avoid Them”

What Is the Point of a Trust?

“Thinking about what happens to your family when you pass away may be upsetting. However, it can be a good way to reduce the stress your loved ones will deal with during the grieving process.”

A trust is an agreement made when a person, referred to as the trustor or grantor, gives a third party, known as the trustee, the authority to hold assets for the trust beneficiaries. The trustee is in charge of the trust and responsible for executing the trust’s instructions as per the language in the trust, explains a recent article from The Skim, “What is a Trust? (Spoiler: They’re Not Just for the Wealthy).”

Some examples of how trusts are used: if the grantor doesn’t want beneficiaries to have access to funds until they reach a certain age, the trustee will not distribute anything until the age as directed by the trust. The funds could also be solely used for the beneficiaries’ health care needs or education or whatever expense the grantor has named, the trustee decides when the funds should be released.

Trusts are not one-size-fits-all. There are many to choose from. For instance, if you wanted the bulk of your assets to go to your grandchildren, you might use a Generation-Skipping Trust. If you think your home’s value may skyrocket after you die, you might want to consider a Qualified Personal Residence Trust (QPRT) to reduce taxes.

Trusts fall into a few categories:

Testamentary Trust vs. Living Trust

A testamentary trust is known as a “trust under will” and is created based on provisions in the will after the grantor dies. A testamentary trust fund can be used to make gifts to charities or provide lifetime income for loved ones.

In most cases, trusts don’t have to go through the probate process, that is, being validated by the court before beneficiaries can receive their inheritance. However, because the testamentary trust is tied to the will, it is subject to probate. Your heirs may have to wait until the probate process is completed to receive their inheritance. This varies by state, so ask an estate planning attorney in your state.

Living trusts are created while you are living and are also known as revocable trusts. As the grantor, you may make as many changes as you like to the trust terms while living. Once you die, the trust becomes an irrevocable trust and the terms cannot be changed. There’s no need for the trust to go through probate and beneficiaries receive inheritances as per the directions in the trust.

What are the key benefits of creating a trust? A trust doesn’t always need to go through probate and gives you greater control over the assets. If you create an irrevocable trust and fund it while living, your assets are removed from your probate estate, which means whatever assets are moved into the trust are not subject to estate taxes.

Are there any reasons not to create a trust? There are costs associated with creating a trust. The trust must also be funded, meaning ownership documents like titles for a car or deeds for a house have to be revised to place the asset under the control of the trust. The same is true for stocks, bank accounts and any other asset used to fund the trust.

For gaining more control over your assets, minimizing estate taxes and making life easier for those you love after you pass, trusts are a valuable tool. Speak with your estate planning attorney to find out which trust works best for your situation. Your estate plan and any trusts should complement each other.

Reference: The Skim (Oct. 26, 2022) “What is a Trust? (Spoiler: They’re Not Just for the Wealthy)”

Who Should I Name as a Co-Trustee?

“Unlike a last will and testament, a revocable living trust is effective during your lifetime.”

If you’ve already created a revocable trust, congratulations—that means you’ve taken steps to protect the people important to you and eliminated concerns they may have about what will happen when you’re gone. A recent article, “3 Things to Consider when Naming Co-Trustees,” from The Street, asks if you should name an adult child as your co-trustee.

Most people name themselves as a trustee of a revocable living trust, allowing themselves to maintain control over how the funds are managed. As children become adults, you may start including them in your estate planning discussions, which may lead them to propose a relatively straightforward idea: letting them serve alongside you, by being named as co-trustees.

This might make sense. However, it may not. You need to ask some hard questions.

First, are you and your adult child in alignment on financial matters? If you are conservative when it comes to money and investing, but your child is a free-wheeling, come-what-may person, then you definitely don’t want to have them as a co-trustee. Not only will you disagree on how assets are to be used, you may also find yourself in a situation where your assets are funding a lot of fun, which is likely not what you have in mind for assets in a revocable trust.

As the primary trustee of the revocable trust, you have the legal power to fire a co-trustee. This presents another obstacle. Firing your child, especially if you’re firing one child and replacing them with another child, could lead to a lot of family friction. Many estate planning attorneys have seen what happens when parents are reluctant to act, even when it is crystal clear they need to be fired.

Second, does their logistical status make this person a good co-trustee candidate? Location and even time zones are not as confining as they used to be. However, there is a real benefit to being able to show up in person if something goes wrong. What if there’s an issue processing something and the bank will not accept a document sent by email or fax, but requires an in-person signature?

Your trust might include language allowing each co-trustee to act independently of the other. However, this opens the door to your co-trustee being able to act unilaterally. If you’re still able to manage your own finances, you may not want to give up this amount of control to an adult child.

Would a co-trustee role with a child require you to revise the entire estate plan? For some trust creators, making one adult child their revocable living trust co-trustee means they need to change their estate plan to be fair to their other children. Sometimes they feel that another child should be named as a Power of Attorney or Health Care Power of Attorney.

“Fairness” or “keeping the peace” should never, ever, be a reason for children or other individuals to be named for estate planning roles. Each agent has a task to do in carrying out your wishes as directed by your last will and testament, POAs and trust documents. Naming a kid who’s a financial disaster as a co-trustee is asking for trouble. Naming someone who doesn’t share your beliefs about end-of-life treatment means your wishes are not likely to be followed.

However, it is possible to have your estate planning attorney create a workable co-trustee arrangement between you and an adult child. If they live close by, you mainly agree on financial matters and they can be available to you on short notice, it’s likely the arrangement will work. If there is no one who could serve, speak with your estate planning attorney about alternatives. For instance, making an adult child a successor trustee will let them step in if and when you are not able to manage your affairs, while you retain full and complete authority while you are still able to do so.

Reference: The Street (Oct. 11, 2022) “3 Things to Consider when Naming Co-Trustees”

Estate Planning Considerations for Minor Children

“When preparing estate planning documents, certain beneficiaries may need more protection than others. One particular class of beneficiaries that needs to be intentionally considered is minor children.”

Creating an estate plan with minor children in mind has a host of variables quite different than one where all heirs are adults. If the intention is for the minor children to be beneficiaries, or if there is a remote chance a minor child might become an unintended beneficiary, different provisions will be needed. A recent article titled “Children need special attention in estate planning” from The News-Enterprise explains how these situations might be addressed.

Does the person creating the will—aka, the testator—want property to be distributed to a minor child? If so, how is the distribution is to occur, tax consequences and safeguards need to be put into place. Much depends upon the relationship of the testator to the minor child. An older individual may want to leave specific dollar bequests for minor children or great-grandchildren, while people with younger children generally leave their entire estate in fractional shares to their own minor children as primary beneficiaries.

While minor children and grandchildren beneficiaries are excluded from inheritance taxes in certain states, great- grandchildren are not. Your estate planning attorney will be able to provide details on who is subject to inheritance, federal and state estate taxes. This needs to be part of your estate plan.

If minor children are the intended beneficiaries of a fractional share of the estate in its entirety, distributions may be held in a common trust or divided into separate share for each minor child. A common trust is used to hold all property to benefit all of the children, until the youngest child reaches a determined age. When this occurs, the trust is split into separate shares according to the trust directions, when each share is managed for the individual beneficiary.

Instructions to the trustee as to how much of the income and principal each beneficiary is to receive and when, at what age or intervals each beneficiary may exercise full control over the assets and what purposes the trust property is intended for until the beneficiary reaches a certain age are details which need to be clearly explained in the trust.

Trusts for minor children are often specifically to be used for health, education, maintenance, or support needs of the beneficiary, within the discretion of the trustee. This has to be outlined in the trust document.

Even if the intention is not to make minor children beneficiaries, care must be taken to include provisions if they are family members. The will or trust must be clear on how property passed to minor child beneficiaries is to be distributed. This may be done through a requirement to put distributions into a trust or may leave a list of options for the executor.

Testators need to keep in mind the public nature of probate. Whatever is left to a minor child will be a matter of public record, which could make the child vulnerable to scammers or predatory family members. Consider using a revocable living trust as an alternative to safeguard the child and the assets.

Regardless of whether a will or trust is used, there should be a person named to act as the child’s guardian and their conservator or trustee, who manages their finances. The money manager does not have to be a parent or relative but must be a trustworthy person.

Review your specific situation with your estate planning attorney to create a plan to protect your minor children, ensuing their financial and lifestyle stability.

Reference: The News-Enterprise (Sep. 10, 2022) “Children need special attention in estate planning”