How to set up a trust for minor children

Money Talk

Your Money

August 08, 2004|By MATT LUBANKO

I am 44 years old, recently divorced, with two daughters ages 5 and 9. Should I create a trust for my daughters?

M-y S.O., Hartford, Conn.

Before you decide how to proceed with your estate plans, consult the court order that governs the terms of your divorce.

This court order might prohibit you from fully disinheriting your former spouse. The court order might also require you M-y if you were the familyM-Fs principal breadwinner M-y to name your former spouse as a beneficiary on a life insurance policy, until your youngest child reaches majority age.

These and other possible provisions within the court order might tie your hands M-y or set you free to do as you please with your revised estate plans, said Barbara Kahn Stark, a family law attorney in New Haven, Conn.

If the court order sets no restrictions on your plans to establish a trust for your children, the major challenges are right out of Estate Planning 101.

Identify the assets youM-Fd like included in the trust. Identify your heirs. Identify the terms under which youM-Fd like your heirs to receive your property.

With a trust that names minor children as your principal beneficiaries, you have an additional responsibility: Naming a competent and honest trustee to supervise the management of your childrenM-Fs inheritance.

M-tThe naming of a trustee should not be taken lightly. Quite often, the wishes expressed in a trust are only as durable as a trusteeM-Fs willingness and ability to carry out those wishes,M-v Stark said.

Can this person competently manage money? Is he or she willing to do the job? Will you pay this person for his or her efforts? Those are just a few questions one should ask when choosing a trustee, Stark said.

Beyond the basics M-y naming of assets, heirs, terms and a trustee M-y itM-Fs also important to inspect the M-tbeneficiary formsM-v you filled out for your retirement savings plans, annuities, pension and insurance policies.

Make a mistake in these forms M-y such as naming your former spouse as a beneficiary M-y and a sizable portion of your estate could be left to someone other than your children, Stark said.

Matthew Lubanko is a columnist for The Hartford Courant, a Tribune Publishing newspaper. E-mail him at yourmoney@tribune.com.

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