Dictating how your assets should be distributed upon your passing is extremely important if you want a say in who gets your money and how much they will receive. Estate planning becomes even more important when you have children because it can indicate who will be the children’s guardians if they are minors. Estate plans can also ensure that someone trustworthy manages the children’s money while they are minors.
When creating an estate plan, you must consider your circumstances as they are today and not base the plan on the assumption that you will not pass for years. For example, if you have a minor child, you need to consider what you want to happen if you pass away while they are still a minor because, under Texas law, they cannot control assets until they are at least 18 years old.
There are a variety of ways that money can be left to your children, including wills, trusts, or by naming them beneficiaries of retirement plans, life insurance, and 529 plans. The best ways to leave your children money are through estate planning tools, such as wills and trusts.
A will is a legal document laying out how someone’s assets will be distributed upon death. If you have minor children, you can also name one or more people as the child’s guardian if you pass away while they are still minors. Generally, while the child is a minor, their guardian will control the child’s money unless another person is named to manage the minor’s money until they reach the age of majority or an agreement set out in the will, whichever is later.
For a will to be valid, you must sign it at the end of the document in the presence of two witnesses. They will also sign the document certifying that the testator voluntarily signed the document in their presence. A will has no legal effect until it is probated in the court of appropriate jurisdiction, which is usually the probate court in the county where you live at the time of your death.
A trust takes assets out of your name and places them under a trust agreement. So, for example, if you own a house, instead of it being in your name, you will deed it to your trust. The party holding and managing the trust is known as a trustee and can be you until death. At that point, a successor trustee will become the primary trustee.
Trusts allow individuals to avoid probate because there is no property in the deceased’s name. As a result, children will have access to the money sooner than if it were left through a will. In addition, the trust can outline how the trustee should distribute the money, meaning you can direct trustees to pay your children’s expenses or cash distributions, regardless of age.
Estate planning tools like wills and trusts are the best options for leaving money to your children because you can outline how and when your children will receive the money. If the child is a minor, you can even dictate how they can spend the money. However, while wills and trust are the best options, there are other ways to leave your children money, including:
- Retirement accounts: Generally, retirement accounts like 401k’s and IRAs allow for named beneficiaries. The money will go to the decedent’s estate if there is no designated beneficiary. Naming a beneficiary will enable funds to avoid probate, saving time when it is accessible to the beneficiaries. Like the original owners of the retirement account, heirs will owe taxes on the money when they take distributions unless they were Roth IRA contributions.
- Life insurance: Life insurance is meant to make sure that people who rely on your financially will be okay upon your death. Purchasing life insurance and naming your children as beneficiaries can provide their children with financial protection upon their parent’s death. You can also name your trust as the beneficiary, allowing your trustee to have control of the life insurance money rather than giving your children direct control of the funds if they have reached the age of majority.
- 529 plans: A 529 plan is a tax-advantaged savings plan to help pay for your children’s education. 529 plans allow tax-free withdrawals for qualifying education expenses, which include expenses directly related to education expenses from kindergarten through postsecondary. Although, withdrawals for expenses for grades K-12 are limited.
Will My Children Receive My Money If I Don’t Create an Estate Plan?
In cases where an estate plan is not created before someone’s death, their assets will be distributed according to Texas’s intestate succession laws. As a result, if you have not made an estate plan, your assets that do not have named beneficiaries will be distributed depending on who survives the decedent by at least 120 hours:
- If there is no surviving spouse, then the children will inherit everything.
- Suppose there is a surviving spouse, and the children are biologically their child. In that case, the spouse will get all of the community property, one-third of your separate property, and a lifetime right to use your real estate. The children will receive the remaining assets.
- Suppose there is a surviving spouse, but the children are not biologically related to the surviving spouse. In that case, the surviving spouse will receive one-half of the community property, one-third of your separate property, and a lifetime right to use your real estate. The children receive the remaining assets.
In Texas, community property generally means any property acquired by a couple during a marriage, with a few exceptions that an experienced attorney of Staubus and Randall can explain.
Contact An Experienced Estate Planning Attorney Today
If you have children, it is essential to make an estate plan because you never know what will happen. The experienced Dallas estate planning attorneys at Staubus and Randall will be able to review and evaluate your specific needs and help you create an estate plan that will help ensure your assets go to those you wish them to.
Whether you are creating a new estate plan or need your current estate plan revised, the skilled attorneys of Staubus and Randall are ready to help. Contact us online or call us at 214-691-3411 for a consultation.