If your child is young, then you probably shouldn't let them manage their inheritance. You need an adult who can make sound decisions to manage assets on behalf of the child. The court will appoint a property guardian for the child if you pass away without naming one. Use the following estate plans to manage properties for your kids without the uncertainties of a court-appointed guardian.
Naming a guardian for your child is one of the easiest ways of managing properties on their behalf. In this case, you use another estate planning document, such as a last will and testament, to name the guardian. In case you pass away, the executor will read the will and reveal your chosen guarding. With the court's approval, the named person then assumes the management of the child's property, in addition to other guardianship duties.
You can also name a custodian instead of naming a guardian for the child. A guardian and a custodian serve almost the same purpose, but there is a slight difference. The guardian handles all the day-to-day aspects of the child's life. This means the guardian is like a substitute parent for the child. The guardian will see to it that the child goes to school, gets a place to live, and gets the necessary medical care, among other needs.
The custodian, however, is only concerned with the child's inheritance. The custodian inherits and manages the property on behalf of the child until an appointed age. This is because kids cannot inherit property directly.
Instead of naming a guardian or custodian, you can bypass both and set up a trust for the child. A trust is a financial arrangement in which one party gives another party the right to hold and manage the property on behalf of a third party. The first party is the trustor, the second party is the trustee, and the third party is the beneficiary.
In this case, you will be the trustor, you will name a reliable trustee, and your child will be the beneficiary. This option requires you to put all the assets you intend the child to inherit in the trust.
For parents with multiple children, you don't have to set a single trust for each child. Instead, you can set up a family or pot trust for all the beneficiaries. In this case, the arrangement ends when the youngest child reaches the age of majority. The older kids will also gain control over their inheritance at that time. Thus, a family trust might not be for your kids if there are big age differences between them.
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