College Cost and Your Child’s Inheritance

College Fund

written by Bay Area estate planning attorney Carmen Rosas.

Question: Our younger son attended a state college  and our older daughter, an ivy league school that cost far more. We want to take into account the difference in the expense as we decide what to leave our sons in their inheritance. How do we do this?

Answer: It’s your decision on how you distribute, and your will or trust can be structured accordingly. However, have you thought through your approach?

Most parents raise children out of a common pot, providing for each one’s unique needs from the same account. Comparing the costs of raising them is a slippery slope.

Does one get more because she did not require braces? The other less because he failed math, took a summer course and could not work a summer job?

I question the wisdom of adjusting inheritances based on uncontrollable childhood circumstances and youthful choices. Also, it could create animosity between siblings.

It’s another matter to base unequal inheritances on what you’ve given them in their adult years. Children tend to understand and respect that approach. For example, if you gave one a sizable down payment to purchase a home, you may want to deduct that from his inheritance.

Whatever you decide, make sure you consider the impact on the relationship of your children and grandchildren after you pass away.

Making Changes- Baby Boomers are editing their estate plans.

Image courtesy of PAE300

Image courtesy of PAE300

In a recent Reuters article, a common trend among baby boomers was discussed.

Parents are making children wait until they are older to receive trust distributions. Due to the economy many parents have adult children moving in with them. That means at 20 and 25, children are living at home and might not necessarily need or use the money as intended.

Baby boomers have been updating and making changes to their will to distribute money to their children at 30 and 35 instead of outright at 18, 21 or 25.

Making these staggering distributions allows parents to ensure that children have funds to cover major life events like going to college or buying a first home.

In the meantime, a family member or trusted individual would act as trustee until the age of final distribution.

The trustee can still make distributions for various needs. For example if your child wants to buy a home, they can. The trustee will purchase it out of the trust assets.

There are numerous reasons for creating a trust and postponing distributions, but beware that an adult at 30-35 may have issues being told they cannot have access to the trust funds. But, just remember you aren’t necessarily trying to make your beneficiaries happy- you are trying to ensure you are a good steward.

So, if you haven’t already updated your estate plan, you should!

What are your thoughts on waiting until children are older to distribute funds? Pros? Cons?

Share your thoughts with us!