Elder Law Report
Elder Law Report
Protecting Your Legacy: Smart Strategies for Underage Beneficiaries
What if leaving an inheritance to your underage children could harm them more than help? Join Greg McIntyre and Jordan Bentley on this week's Elder Law Report as we tackle the complicated and often misunderstood topic of underage beneficiaries. We'll discuss why directly leaving money or property to minors can lead to inaccessible funds and poor financial decisions, potentially turning a well-meaning gift into a detrimental burden.
Tune in to explore smarter strategies for securing your child's or grandchild's future. We dive deep into the benefits of trusts, where discretionary language can control how and when funds are distributed. Learn how structuring these distributions over time can support educational goals and major life milestones without overwhelming young beneficiaries. This episode is packed with actionable insights to ensure your legacy contributes to a prosperous future for your loved ones. Don't miss this critical conversation!
Hi, this is Greg McIntyre with this week's Elder Law Report, and we're going to talk about underage beneficiaries, so children or grandchildren that are under the age of 18. And why might it be a bad idea? I'm joined by my fellow associate, attorney Jordan Bentley, who is in our Hendersonville office.
Jordan Bentley:And thank you for being here. Jordan, Happy to be here. Thanks for having me, Greg ofice.
Greg McIntyre:And thank you for being here. Jordan, happy to be here. Thanks for having me, greg, absolutely. What might be issues with giving?
Jordan Bentley:money or property. Leaving that directly to an underage beneficiary? Well for one you can't. You can't leave it to them in a way where they can use it if they're under 18. They're not going to be able to have access.
Greg McIntyre:You can, it's just going to be stuck, Correct.
Jordan Bentley:Correct. Also, you know more obviously, right, you might not trust their decision making, right, you might not want to give a big pile of money to someone who isn't. What is it? Their frontal cortex isn't fully developed, or something like that. You might not want to do that right. You might not want to give them money to defer them or deter them from getting an education or starting a career, things like that.
Greg McIntyre:Absolutely, and you know I have underage children and they're really good kids. Good kids. But still when you're let's say when you're 18, if you receive a lot of money or property, you might not make the best decisions with it. You know, I might have blown that money and regretted it right On things that would not have been wise when I was 18. So those those gifts or requests can be a blessing but also a curse. So how do we responsibly give to underage beneficiaries in a way that is a blessing and kind of keeps on giving and help helps us set up an estate plan where we can still a setup in a state plan where we can still be wise with our giving and how we support a child?
Jordan Bentley:or a grandchild that may not be 18 yet. Yeah, I think, specifically with that in mind, that a trust can be a very valuable, a very key tool to accomplish that. Not only does a trust avoid probate which is not what we're talking about today, but it is important. Not only does it avoid probate, so you know those people are going to get it, they're going to get the stuff, the assets that you've put in the trust, but also you can control, you can put incentives or parameters on when and how they receive that money, what it's used for and even when it's used.
Greg McIntyre:Sure, sure. So I know in a lot of the trusts that I draft for clients who have children or grandchildren who are under 18, I will put in discretionary trust language or recommend discretionary trust language, say for health, education and welfare. That's kind of discretionary trust keywords until they're 25. So with the intent to pay for or assist with college, university or trade school, and then maybe a 10 and 10 distribution thereafter, 10% of income in principle from say 25 to 35, until all trust resources are exhausted to help them get into life after they've graduated from college, career, house, things like that.
Jordan Bentley:So you're giving them the money to use for education or for learning a trade or starting a business now and then you're also leaving that safety net in there, that 10 and 10 you talked about. You're not just giving them a lump sum at any point. That's right.
Greg McIntyre:I think that's a wise thing to do is to help control that money flow so they don't receive too much all at once too early. Or you know and regret blowing their inheritance at 18, 19 years old.
Jordan Bentley:Or 25, right, if they get the rest of that lump sum when they turn 25, that could still be used.
Greg McIntyre:Yeah, yeah, they go out and live it up right after college, right. I mean, you know it'd be nice if they were getting into a career and then we were giving them money to help them along, if it were to buy a house, a condominium or, you know, help with a marriage, you know things like that. We can still do that, even if we passed away, we can set our assets up to help our family and help our children, grandchildren, right, yeah, discretionary you had mentioned before we started that. Yeah, there's some advice that you give clients and you like to talk about, like the spring break break issue, just really being specific, in particular, with how you draft those things yeah, the discretionary trust, I think are for lack of a better word very, very cool.
Jordan Bentley:They give you I'm stealing this quote from you, you know dead hand control. You can control, like we're talking about. You know who gets stuff and what it's used for and when they get it and how they get it. But what's important, right, is you're going to be gone. So you've left those rules. You've put your discretionary or your discretionary language or your incentivizing language in there. You know, go to college when you graduate, you can get it or you can use it for college or things like that.
Jordan Bentley:You want to make sure that the trustee, the successor trustee, the person that's going to be managing those trust assets, you know knows what you meant by that language. The spring break example that you were talking about I like to bring that up with clients and say you know, if I was the trustee of a trust, if I'm managing your trust for the benefit of your grandchildren. It says, my granddaughter can use this money for education and she wants to take a spring break trip. You know, I'm probably going to let her certainly pay for tuition, certainly pay for books, probably pay for an apartment or a car to move to a college when she gets into, or something like that. Start a business, sure, but it's taking a spring break trip or taking a three-day weekend from your business.
Jordan Bentley:Is that professional development? Is that education? I think it might be. I'm pretty flexible with what I'd allow my beneficiary to get the money for. You might not want to not have intended that, right. Maybe you mean specifically tuition. You want to say that and then you want to also have that conversation with the person who's going to be your trustee and make sure they know what you meant. Very important, you're just leaving them instructions.
Greg McIntyre:Yeah, I think you're leaving them instructions and guiding language on how to use their discretion, right, you're really guiding what those discretionary distributions look like and words like professionalism, other sources of funds right, other places that money can come from. Really guiding what those discretionary distributions look like and words like professional Other sources of funds right, you know other places that money can come from, because you do want them to guard those trust assets really for the use of benefit and betterment of the beneficiary.
Jordan Bentley:If that's what you intend right and you want to word it that way and be as specific or as vague as you think you need or you ought to be. And that's what's cool about trust is they're customizable and you can make them fit your desires, your situation, your family, your assets. They're very cool, for lack of a better word.
Greg McIntyre:Agreed, agreed. Well, jordan, thank you for discussing today how to best leave assets to underage beneficiaries. So for parents of young children out there, for grandparents who have young grandchildren out there, we'd be glad to help you plan for underage beneficiaries and through estate planning as part of your estate plan, and we would offer a free consult. You can take advantage of that by calling 1-888-999-6600 or by scheduling directly on our calendars online at mceldernawcom scheduling. Thank you, jordan, you have a great day. Thank you, greg. All right Bye.