What are the dangers of direct gifts to minors in Iowa estate planning?
Creditors attempting to collect money may swoop in when a beneficiary receives a direct gift. Minors might not have the resources or capacity to repel or assuage these creditors, especially if your estate plan was insufficient and gave assets to beneficiaries who did not expect them. More than anything, minors receiving direct gifts will require structure so that they do not squander the assets or lose them in business dealings they do not fully comprehend.
Before you consider whether or not to give a minor a direct gift, you should reach out to a skilled Des Moines estate planning lawyer to discuss how to protect your beneficiaries.
How can you protect minors receiving direct gifts in Iowa?
In the Hawkeye State, you have a few options at your disposal, most stemming from the establishment of custodial accounts and/or trusts. Some of your options are as follows:
- Custodial account: This method can be adapted to fit your needs, but it provides structure to when and how the minor receives the assets until he or she reaches a certain age, upon which time the assets are directly passed on to the recipient, including all investment and management choices.
- Irrevocable trusts: This method lets assets be utilized for a wide range of needs, including medical costs or the purchase of real estate, but a trustee can manage the assets even after the recipient reaches the age of 18 or turns 21.
- Minor trusts: This method applies assets for minor beneficiaries with limited exceptions and, once the beneficiary turns 21, affords him or her the opportunity to withdraw assets from the trust. Any assets not withdrawn can be kept in the trust, which can then be converted to another type of irrevocable trust that permits continued annual exclusion gifts to be made to a beneficiary.
Let our firm help you determine which is the best option for you and your beneficiary. Please give us a call today.
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