My partner, Ray Cannon, created the chronicles of Dick and Jane to help clients understand some of the intricacies of estate planning and elder law. With thanks and appreciation for his sense of humor and legal skills, we bring you the 2019 life of Dick and Jane.
JANE HAS A CHILD
Jane called me recently and proudly exclaimed that she and Dick had just had a baby which they named Sally. I suggested that we meet to consider implementing an estate plan for her and Dick now that Sally had arrived.
I advised Jane that she could nominate someone she knows and trusts within her Will to be Sally's guardian if she and Dick were both deceased. The guardian cares for the minor child and is often also in charge of the child's financial resources.
A guardianship ends when the minor child attains age 18, at which time the child could withdraw all of the assets in her guardianship account. Would Jane really want Sally to have access to their entire estate at age 18 if both she and Dick were deceased? Jane recalled how immature and naive she was at 18 when it came to money matters.
As a result of this discussion, Jane determined that she and Dick should set up a trust for Sally's benefit in the event that something happened to both Dick and her.
Based upon this discussion, Jane decided that she would set up a trust for the benefit of Sally if she and Dick were deceased. She liked the idea of staggering distributions based upon the child's age: one third of the child's share payable at age 25; one half of the balance of the share at age 30 and the remaining balance at age 35. She also concluded that she wanted the trust to avoid probate and that if the trust were funded prior to her death, that those assets would avoid probate. Funding generally means assuring that the title to the asset is now in the name of the trust or that the trust is a beneficiary of that asset. Jane could have created a trust under her Will, but that would have guaranteed the involvement of the probate court.