Does your estate need to account for biological or adopted children, stepchildren, and/or grandchildren?
When your family needs to account for children, various Oregon trusts for kids can be an essential part of your Oregon estate plan. A range of trusts can align with how you want to provide for:
- Biological children
- Adopted children
- Stepchildren
- Grandchildren
Here are four trusts in particular that you might discuss with your Oregon estate planning attorney:
- Revocable Living Trusts
- Qualified Terminable Interest Property (QTIP) Trusts
- Generation-Skipping Trusts
- Discretionary Spendthrift Trusts
Or, if you’d like to discuss your circumstances and the right mix of legal instruments for your estate, get in touch today:
Depending on the circumstances, the children involved, and how you want to provide for them, no trust is a one-size-fits-all solution. Here’s a quick overview of each.
Revocable Living Trusts
Especially for minor children, trusts can manage, protect, and distribute assets, usually until the terms of the trust have been fulfilled and the trust wound down. The Revocable Living Trust, or RLT, is a common way to protect assets accordingly.
For example, parents may want to provide for children so that assets in the trust benefit the child’s welfare, upbringing, and/or quality of life until a specified age or circumstance.
You can set up various assets so that, upon your and/or your partner’s death, the assets pass into the ownership of the trust. For example, instead of a life insurance policy listing the children as the beneficiaries, the trust is the beneficiary. The funds go into the trust, and the trustee can manage and distribute funds according to the terms of the trust.
Assets that might go into an RLT can include:
- Insurance policies
- Bank accounts
- Investment accounts
- Other financial or real property assets
Throughout the effective period of the trust, those assets can provide for the children.
Trusts are flexible and adaptable enough to fit a range of circumstances and preferences. RLTs become especially useful when considering blended families, grandchildren, and other circumstances. This can be especially important should you wish to provide for stepchildren. Outside of formal adoption, stepchildren only are part of your estate or bequests as your trust or other estate documents specify.
Qualified Terminable Interest Property (QTIP) Trusts
When a family needs to balance providing for a surviving spouse and then subsequent children, the Qualified Terminable Interest Property Trust, or QTIP, can be a reliable solution.
The QTIP enables a surviving spouse to receive benefits from assets as well as certain tax benefits, such as the marital deduction.
Once the surviving spouse passes away, the QTIP then can redirect benefits of assets from the spouse to children as specified when the trust was established.
The QTIP balances providing for loved ones, with ensuring that such benefits have protection, and that distributions are controlled by the trust itself. This type of trust can be especially useful for blended families, when stepchildren and/or a subsequent spouse are part of an estate, but the person establishing the trust also wants to provide for children from a prior marriage.
Generation-Skipping Trusts
Instead of benefiting one generation of children, such as your own children, the best choice can be to benefit your grandchildren instead. Generation Skipping Trusts hold and protect assets, so that they can be used to the benefit of that next generation.
How you set up this sort of trust can be to firmly exclude one generation, or to vary how you provide for children as opposed to grandchildren. The terms can be more customized depending on the situation and your preferences.
Discretionary Spendthrift Trusts
When there’s concern about how beneficiaries might use assets, the Discretionary Spendthrift Trust can put guardrails and brakes on the use of those assets.
This type of trust also can protect assets from creditors, for example, when a divorce settlement or other financial issue could be in play.
Spendthrift trusts specify conditions that have to be met in order for the trustee to distribute assets. One common way to do this is a set distribution, such as annually, quarterly, or monthly. Assets can be paid directly to beneficiaries, or the trustee may also pay to a service provider, such as a school, university, medical service, or even a landlord.
The Spendthrift Trust can take more consideration to setup, but the benefit is that you can dial in specifics on how you want to guard assets, while setting up distribution to the parties you want to provide for. However, that can also make these types of trusts more expensive to establish, maintain, and administer.
“Discretionary” is an important part of the trust setup too. The trust empowers the trustee with discretion over the distribution—or holding back—of assets. That way, the trustee can potentially protect both the trust and the beneficiaries.
Typically, Discretionary Spendthrift Trusts balance long-term asset protection with financial benefit to the beneficiary. That way, the trust can continue to operate while preserving assets yet still paying out as intended.
Different trusts and different family needs, but all serve to benefit those you care about
Whoever you want to provide for and however you want to balance benefits with asset protection, a range of Oregon trusts for kids are available. Whether biological and/or adopted children, grandchildren, or stepchildren, you can provide for them and cover them under your Oregon estate plans.
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