Whether your children are younger or older there are a few things to be considered about how your estate will be distributed to them. Read on about how the distribution of your Will works.
The first method is called capital distribution. Under a “capital” distribution method only the surviving children would receive an inheritance from your estate. For example if you had a $150,000 life insurance policy that was to be divided equally among your three children, but one of the children predeceased you, then the policy would be divided equally between the remaining two children.
The other method of distribution is called stirpital. Under the “stirpital” distribution if one of your children were to predecease you, their children would receive the inheritance that your child would have received as if they were still living. So in the example above with the $150,000 life insurance policy, your two surviving children would each receive 1/3 of the policy, and your deceased child’s children would receive 1/3 as well. Which method you chose is solely up to you, it will come down to your family dynamics and who you want to receive your estate. Another important thing to consider if your children are younger is the distribution date. This is when they will receive their inheritance if they are under the age of majority. You can leave specific instructions concerning the distribution dates for your children or grandchildren. If you neglect to do this, this will receive their full inheritance once they reach the age of majority. Which could mean they receive a significant sum of money at an age when they are still relatively immature. Many people prefer to spread the distribution out so to avoid the inheritance being “blown” on teenage necessities. It is common to stipulate the child will receive 25% upon reaching the age of majority, and another 25% at age 21, and then the remainder when they turn 24 or 25. Provision must also be made for another beneficiary to receive each child’s share should the child fail to attain the ultimate distribution date.
This is an important aspect to consider, even if their expected inheritance seems low. If you have given investment instructions in your Will allowing the trustee to invest in investments other than guaranteed products, a 2 year old child that inherits $250,000 could see it climb to close to $1,000,000 by the time they reach 18, even with conservative risk investments.
Information in this article is not legal or financial advice: The advice provided in this article is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. You should not act or rely on any information in this article without consulting a qualified professional financial or legal adviser, as appropriate. You may reach out to the author of this article, Raymond Knight at: raymonddknight@gmail.com.