Photo of Nilson Brand Law attorneys
Photo of the attorneys at Nilson Brand Law.

Attorneys Who Give It To You Straight

Why naming children as beneficiaries in a will could be a mistake

On Behalf of | Oct 20, 2024 | Estate Planning & Probate

A will is arguably the most basic estate planning document, and it is often the first instrument people create when thinking about their long-term legacies. Becoming a parent can be a profound incentive to think about what happens after someone dies.

Parents generally want their children to survive and thrive long after they are gone. A will can be a way to protect children, as it allows parents to name a guardian who can take care of them if they are no longer there. However, a will may not necessarily be the best way to leave an inheritance for children who are not yet legal adults. Many new parents decide to establish and fund a trust in addition to drafting a will where they designate a guardian for their children.

Why is the choice to name children as direct beneficiaries in a will sometimes questionable?

Children don’t control their own assets

With the exception of emancipated minors, children generally do not have direct control over their own resources. Parents have legal authority over their children which includes the right to make choices on their behalf, and they also have a responsibility to provide for their children. Part of that responsibility entails managing their resources in most cases. If parents die while children are minors, their progeny may very well inherit from the estate.

However, the guardian of those children or the surviving parents has control over their resources. Guardians may use up most or all of an inheritance before the children become legal adults, leaving nothing to help them establish themselves, start a business, buy a house, or pay for college. In some cases, guardians and surviving parents may abuse an inheritance to enrich their own standard of living instead of prioritizing the best interests of the children.

A trust provides a degree of separation between beneficiaries and trust resources. Provided that the trustee is not the surviving parent or guardian, the trustee can intervene in scenarios where they question the necessity of certain expenditures. They can seek to preserve resources for the children when they turn 18. Parents establishing the trust can also put specific limitations in place to prevent the abuse of trust resources for the benefit of a guardian rather than the child beneficiaries.

While it is natural to want to trust the people empowered to care for one’s children in a tragic situation, the unfortunate reality is that access to wealth often corrupts even kind and ethical people. Those hoping to leave a meaningful, positive impact on their children when they pass may need to establish a trust as part of their estate plans. A trust can be a means of preserving resources for when their children are old enough to appreciate and properly manage their inheritances.