Estate plans should be all-encompassing. This can include cars, homes, stocks and even digital assets. But another thing estate owners should consider is their beneficiaries, especially if they are minors.
According to Dan Goldfarb, a financial adviser at Resource Strategies Inc. in Pepper Pike, and Harlan S. Louis, a member at Bailey Cavalieri LLC in Columbus, including minor children is not just naming them on assets. “The most important thing is who do you want to be the guardians of the children,” Louis said. “Sometimes this is very difficult for clients to think about and many times spouses have difficulty deciding on the right person or persons.”While discussing who might be the best guardian for minor dependents, parents can consider a few things, Louis added. “Clients need to think about finding people they can trust and are at an appropriate age,” he said. “Sometimes, a grandparent might be too old to take on the rigors of raising a child again, while an adult child may be too inexperienced to take on this role for a minor child. Also, where the potential guardian resides might be important to the client.”
Other aspects include the amount of work needed to care for the minors and consider alternative guardians if those named can’t set up to the task.
Goldfarb added while guardians are the first thing to consider, individuals should also know assets in an estate cannot just pass outright to minor beneficiaries.“Even though some individuals name their minor children as beneficiaries on their life insurance policies and investment accounts, these assets will not be paid directly to the minors,” he explained. “Individuals should keep in mind that any assets naming a minor as the beneficiary will be held in trust for the minor’s benefit until the minor reaches the age of majority.” In this case, Louis suggested naming a trustee to handle a minor’s assets.“Ideally, the guardian and trustee should be separate people so that they each act as a check on the other,” he said. “The person, or company, named as trustee should be experienced at investing and distributing money, taking into account the minor’s current and future financial needs based on the money available.”
Having a trustee look after a minor dependent’s assets can also help protect them, Goldfarb said.“Individuals should speak with their financial adviser and estate attorney regarding how trusts may protect assets for the benefit of the minor beneficiaries,” he said. “These trusts may be created during the individual’s lifetime or upon their death. Individuals can specify how the trusts should be administered, how the financial assets should be managed, how the trust will make distributions to the minors, etc. If desired, these trusts established for the benefit of minors can be designed to protect assets even after the minors reach the age of majority.”
As minor beneficiaries age, plans should be adjusted often to account for any changes within the family or otherwise. “After creating an estate plan, this plan should be reviewed at least every three to five years,” Goldfarb explained. “The estate plan should be reviewed more frequently if there is a significant change in the estate tax laws, if the individual has a major life event or if there is a need to update the named guardians.”
Louis said some of these major life events include: moving out of state where laws may be different, changes in the client’s assets, changes in the minor’s needs, changes in the capabilities of a guardian or trustee or changes in the client’s relationship to a guardian or trustee. Even choosing how to provide for a minor after death is a tough decision, so the professionals offered advice. “If people are unsure how to leave their assets properly, they should speak with their financial advisers and estate attorneys to receive further guidance,” Goldfarb said.
Louis said, “It is very important if the client is unsure to have a detailed discussion with the client’s attorney and other advisers/confidants to understand the nature of the concerns and how to best address it.”
This article was written by Becky Raspe, Special Section Staff Reporter for Cleveland Jewish News