In the phenomenal movie, Birdman, divorced parents bicker over their planned legacy for their daughter. (And Michael Keaton stars as a washed-up movie star attempting to reignite his career with a Broadway play based on the stories of Raymond Carver.) There is much fodder for discussion in both the premise and the movie’s larger themes – and I, for one, believe the Oscar trophy for Best Picture to be justified in this instance. However, I want to focus on the brief scene where actor/director Riggan Thompson (Michael Keaton) tells his ex-wife, Sylvia (Amy Ryan) that he plans to take out a loan against his Malibu house to finance his play. Her objection? She thought that they’d agreed to preserve that house to pass along to their daughter.
What does a scene in Birdman, in a broader context, have to do with the things parents talk about when we talk about estate planning? Plenty! It manages to condense, in a few lines of dialog, the conflicting interests which are often at play when parents plan for what they want to leave to their children if something happens to them.
Even if you, like me, do not have a house in Malibu, shouldn’t you have a plan in place for how your assets will be transferred to your children if tragedy strikes, and your children are left without parents? As I mentioned in an earlier blog post, a will that nominates a guardian to care for your kids and includes a children’s trust will go a long way toward ensuring your children’s financial future will proceed as you intend.
What happens if parents decide to skip making a will? Individuals under the age of 18 cannot inherit property directly in Washington. (Fun fact: Minority is one of the “conditions” that renders someone incompetent under Washington law.) If you die without a will and you are not survived by your spouse, your estate would pass to your children. However, if your children are minors, a guardianship would be initiated. The assets would be placed in a custodial account, which the guardian could access for the child’s benefit until the child gains control of the account at age 18, although it is possible for funds to remain in custodial accounts until the child is 25. If you want more control over how your assets are transferred to your children – and control over who will manage those assets without court intervention – a testamentary children’s trust is a necessity.
What is a testamentary children’s trust? Simply put, it is a trust that is set up in a will. This is not the type of trust you transfer all your assets over to during your lifetime. Rather, a testamentary trust becomes an asset-holding entity only after you die. The personal representative/executor of your estate will then transfer your assets to the trust under the terms of your will. In your will, you can designate a Trustee to manage the assets to be held in trust for your children, and direct distributions to be made for the children’s health, education, support, and maintenance. You can also designate the ages at which your children would inherit outright any balance remaining in the trust once they are adults – or spread it out over two or three distributions made at different ages. The ages and even the standards for distribution can be adjusted to reflect individual families’ circumstances and priorities. Drafting an effective testamentary children’s trust is a complex process, and the advice of an estate planning professional can help you to achieve your objectives.
As this recent New York Times article discusses, modern families often have modern money concerns, even if they are not wealthy. A solid estate plan helps address some of these concerns. We are happy to discuss the details of setting up a testamentary children’s trust with you!
Photo credit: Stephan Hochhaus on Flickr