Passing Assets to Children


Hello, this is Richard Morgan at Morgan and DiSalvo. Another one of our back to the basics video newsletters series. This topic is how to pass assets to the children if you’re single at your death and if you’re married at the second spouse’s death. There are three options. Option number one, it’s really simple. You just give the asset to the child or the children outright. Normally, they’re in equal shares, whatever shares you want, but the key is you give it to them outright. In smaller states, that may be the right answer.

Option number two, when you have younger children, you give it to them in short term trust. Why? They’re not old enough to get it yet, so we’ll have a trustee control those assets on their behalf and provide for them until they’re old enough, then you either pay it out to them in one lump sun, which we don’t really favor, or two or three installments, which we factor. If you give them more than one installment, they can learn from their mistakes.

There’s a third option which is the one we favor for wealthier families. What I would say is if you’re around 300,000 per child, it probably isn’t really worth it. Get around 500,000 per child effectively, it starts to become really pretty good. At a million dollars per child, it’s a no-brainer, so what is that option? We call it longterm trust planning. Longterm trust planning is the same exact deal as a short term trust.

It’ll be in trust for the child until the magic age or ages. At the point you would have distributed the assets out to the child, instead of doing that when you distribute it out, it’s unprotected. Whatever the child’s problems are, they can attach it. They get divorced. They have bankruptcy. Whatever it is, they can attach it.

Instead, we leave it in trust for the rest of their life. Now, if we want — it’s a separate question — we can have the child become their own trustee in control of their trust share, so from the child’s perspective, it’s practically invisible, but legally, it is like a protective shield around any unwanted outsiders. This trust can last through their grandchild’s generation under new Georgia law which allows trusts to last up to 360 years. We can make the trust last as long as you want it to.

As long as it’s effective, we have a protective shield around the assets that pass down to your family.

It’s Richard Morgan at Morgan and DiSalvo.

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