Fords Not Ferraris - Structuring Gifts to Children Through Proper Estate Planning

By: Christopher D. Mackey

July 25, 2017

For couples with young children, an integral aspect of estate planning is ensuring that their children will be provided for in the event of both parents passing away. This is first accomplished by naming guardians who will look after and care for the children. However, this is not enough to adequately provide for the children’s future well-being. By only naming a guardian for the children, parents do not properly address the distribution of their assets to their children.

In the absence of an appropriate estate plan, the children would be able to access the entirety of the assets left to them when the turn 18. While the children do receive the assets left to them by their parents, receiving a lump sum at 18 (or if they have already turned 18) is far from the best way to ensure their assets are protected.

While some eighteen year olds may be able to appropriately manage the assets left to them by their parents, some may choose to take the assets left to them and purchase a new Ferrari convertible. To avoid this, we advise our clients to structure their gifts to their children, thus ensuring the proper management of the assets. This is done by creating a trust which includes structured gifting language that states exactly when their children will be able to access the assets left to them. For example, the parents can state that they want their children to access 1/3 of the assets gifted to them at age twenty-five, 1/2 of the remaining balance of the gift at age thirty, and the remaining balance at age thirty-five.

By structuring the gifts to the children, the parents are also able to appoint a trustee who is in charge of managing the assets for the benefit of their children. This can be a family member, a trusted friend, or even a corporate trustee such as a bank. The trustee is responsible managing any business holdings, investing assets in appropriate investment vehicles, and managing any property holdings.

The trustee is also responsible for providing the child with money for the child’s heath, education, and maintenance in reasonable comfort. While health and education are easy to understand, we often receive questions as to what “maintenance in reasonable comfort” means. In its simplest terms, this provision allows the trustee to make payments to children for the child to maintain the same standard of living they experienced prior to their parent’s passing. This may be as simple as making a payment for the child to purchase new clothes, assisting with the child’s living expenses, or purchasing the child a car. However, it is the trustee’s responsibility to decide if these payments are “reasonable.” For example, while a child may need a new car, it is likely unreasonable for that new car to be a Ferrari. In this situation, the trustee may determine that a new Ford Expedition is reasonable for the child’s needs, and provide funds to purchase that vehicle. This ensures that the child is still adequately provided for, while safeguarding the assets so that the child can use the funds throughout their lifetime.

Every parent wants to ensure that their children are properly provided for if something were to happen to them. However, it is not enough to simply name a guardian for the child, rather parents must contemplate they should structure the distributions that go to their children if they passed away. Without this structure, parents could be providing their children large amount of money that very easily could be mismanaged by the child.

Should you wish to discuss these issues or learn more about why estate planning is not just for the rich and famous, please feel free to contact the author, attorney Christopher D. Mackey at Lavelle Law, at 847-750-7555 or


Disclaimer: This article provides legal information of a general nature and is not intended as legal advice, nor does it create an attorney-client relationship with any person or group of persons. Should you wish to obtain legal advice concerning your particular situation, contact an attorney.