Will or Trust Part 1: Considerations When It Comes to Your Children
Noah and Emma were moving along pretty well with their life plan – two adorable children, a home in a good neighborhood, minimal debt and some money in their 401-Ks.
Like most young couples, they worried about their children should the unthinkable happen – that both parents die at the same time. While they both enjoyed good health and a healthy lifestyle, Emma and Noah thought it prudent to know that their kids would be safe if catastrophe struck.
After a discussion with legal counsel at Toburen Law, they learned that there are two main paths they could follow to find the peace of mind they sought: write a will or establish a trust that would instruct how their assets would be dispersed, and by whom.
There are pros and cons for each path, but either path would provide a good measure of protection, they learned.
One thing Noah and Emma knew for sure – they needed to appoint a guardian through their wills so they could decide who would raise their children if they both died. Through their wills, they would also choose a conservator to manage the money they left for their children. In some cases, the guardian and conservator would be the same person. In other cases – maybe the guardian of choice is not disposed to handling money - the guardian and conservator may be different people.
As Emma and Noah considered family members and friends, it dawned on them how much of a commitment it would be for the person chosen as guardian. The most likely candidate was Emma’s sister, who was married with three children and about the same age as Emma. Emma’s sister and her husband were good parents and even-handed with their children, so it seemed likely they could handle two additional children, if it happened.
But it also was clear that Emma’s sister and her husband would need financial help if they had to raise two more children, as their three-bedroom house was already bursting at the seams. And, although Emma’s sister had a heart of gold, she wasn’t versed in money matters – and really didn’t care to learn the subject.
Toburen Law encouraged Emma and Noah to consult with a financial advisor to determine their options for naming a conservator. They were surprised when the advisor tallied up their assets – including term life insurance policies for each of them – and determined that their total worth exceeded $900,000 should they both die. Emma and Noah were relieved that Emma’s sister’s family wouldn’t face financial hardship if they had to raise two additional children. It was also a relief to know that the financial advisor would serve as conservator to ensure that their money would be handled appropriately.
Establishing a will instead of a trust to distribute their estate did cause some concern for Emma and Noah, however. By law, beneficiaries of a will receive their full inheritance when they turn 18 years old. When Emma’s and Noah’s children turned 18, the conservator would write them a check for the full amount of their inheritance, with no restrictions on how that money could be spent. Both Emma and Noah had concerns about their children receiving such large sums of money at a young age. So Toburen Law outlined the advantages of creating a trust, as well.