Leaving It to the Kids

Jared Client, age 45, was divorced. He shared custody of his two daughters, age 10 and 12, with his ex-wife. (She was a loving mother, but Jared didn’t trust her with money. Her well-developed talent for spending was not matched with a talent for budgeting or saving. Jared was still paying off the credit card bills she had acquired during the marriage.)
Jared didn’t consider himself wealthy. He had a condo worth $250,000 with a First TD loan of $80,000. He had $40,000 in liquid assets, a 4-year old car worth $10,000 gross (with a bank balance of $8,000), furniture of negligible value, and a life insurance policy ($50,000) payable to the children.
Jared wrote a simple will, leaving everything to his daughters. He named his brother, George, Executor of his estate. Jason knew that George would protect the girls from their mother’s financial imprudence.
Recently Jared died of heart attack. George is probating Jared’s estate.  By the time the probate procedure is complete, in eight months to a year, he’ll have spent well over $10,000 in attorney fees and court costs. The net proceeds of the estate, and the life insurance proceeds, will be distributed to whomever the court appoints Guardian of the minor children. (That might be their mother, despite Jared’s strong wishes to the contrary.) Each of the children will each be entitled to her respective share when she is eighteen, even if she isn’t yet mature enough to handle significant money.
Ouch!
What Jared could have done is avoid probate by forming a living trust, holding title to his assets as trustee of such trust. The trust could have been beneficiary of the life insurance. Jared could have directed that his brother, as successor trustee, hold the trust assets for the benefit of the children. Brother could have been authorized to pay out income and principal for the girls’ health, education and support, after considering other assets or sources of support available to them, with final distribution when each child has grown older and more mature, such as at age 21, or 25. Their mother would never have control, and by delaying final distribution, Jared would have protected the girls from themselves and their “friends”.
Jerry Kessler practices law in Santa Clarita. He can be reached at 661-255-1001.