Estate planning mistakes parents sometimes make

On Behalf of | Feb 9, 2017 | Firm News, trusts

North Carolina parents usually plan their estates for the benefit of their children. Not wanting their child to suffer the financial hardships that they did, they may be more than willing to name their child as the beneficiary of their most valuable assets. However, it is important that they plan their estate carefully while keeping in mind that their children may not be capable of handling money wisely yet.

Many parents simply list their children as beneficiaries on their financial accounts without considering the children’s ages. Though minor children cannot inherit a life insurance policy, investment account or savings account balance until they reach adulthood, they still might not be ready to handle a windfall the day that they turn 18. If parents are planning their estate while children are still minors, it may be best to set up a trust to benefit the children rather than leaving their children money outright.

Some parents decide to open joint accounts with their children during their lifetime so that their children can have access to the funds. Although this may seem like a convenient choice, opening joint bank accounts can actually be more complicated for estate planning purposes than simply naming a beneficiary on a bank account. If there is no documentation to prove that the child had ‘rights of survivorship” on the account, the child may not receive the balance when their parent dies. A creditor could also seize the bank account balance if the child has an outstanding debt.

Parents who would like to create an estate plan for the benefit of their children may want to talk to an estate planning attorney about their unique situation. An attorney can help them understand the benefits of different types of trust vehicles depending on the value of assets that will be involved and the needs of the beneficiaries.