Episode 36: Why Your Parents Should Have a Family Trust

Estate Planning Lawyer, Peter Klenk

Why Your Parents Should Have a Family Trust

Today, we’re going to talk about why you, as a child with living parents, might want your parents to form a family trust. What’s the advantage? Why might you call them up and say, “Hey, you should do this”? Let’s walk through it.

I’ve done other podcasts about what family trusts are, and you can listen to those too. I’m not going to go through all the details today, just focus on this specific aspect: what’s the advantage for the child in a family trust? That’s our topic.

Let’s start with some basics, in case you haven’t listened to the others—or maybe you forgot. What is a family trust?

“Family trust” is really a marketing term. It refers to an arrangement where a person plans not just for themselves, but for their entire family—their spouse, kids, grandchildren. Everyone is taken into consideration. You, as the child, are part of that group.

So why would you want your parents to do this?

First, this is usually a revocable trust while your parents are alive. It’s something they create, can use, and can revoke whenever they want. You still have to remember their birthdays and be nice to them, because it’s not permanent—they can always change it. But once they pass away, it becomes irrevocable.

Both parts can be helpful for you, especially if you’re the one who may have to step in and take care of them if they get sick, develop Alzheimer’s, or have a stroke.

The revocable part is mainly about avoiding probate. And if you’re the one in charge, that’s wonderful. You probably don’t want to go through the probate process, especially if you live far away.

If your parents die and we have to file the will, it’s not the end of the world, but it takes time. You’ll have to pay some expenses out of pocket because you don’t have access to their money until the county gives you permission. So you’re paying fees upfront, then waiting for reimbursement.

Meanwhile, what’s happening? There’s a funeral… who’s paying for that? Probably you. Who’s taking care of the cat? Probably you. You don’t have access to the money yet, so you’re covering expenses and taking time out of your own life to handle it all.

A revocable trust avoids that. Once your parent dies, you— as the successor trustee—are immediately in charge. You can collect the money, pay the bills, take care of the cat—all of it—right away. It just makes your life easier.

That alone might make you say, “Mom, I really want you to do this,” simply to save yourself a lot of hassle later on.

But there are other benefits too.

If your parents become incapacitated, maybe they develop dementia or have a stroke—the trust helps again.

Traditionally, people use a power of attorney, and it works, but banks don’t love them. There’s paperwork, delays, and suspicion because, frankly, a lot of people misuse them.

If your parents have a revocable trust and name you as a co-trustee, you can write checks, manage money, and monitor accounts without needing permission. Of course, this is only something you do with a child they truly trust.

While they’re healthy, you don’t have to do anything. But if something happens, you can step in immediately, no court filings, no proving incapacity, no delays. You’re already in place and ready to go.

Eventually, your parents will pass away, it’s inevitable. When that happens, if they’ve done things correctly, your inheritance can go into an irrevocable trust for you.

Why? Because that structure protects your inheritance. You can use the money, invest it, and spend it, but if you get divorced, your spouse can’t touch it. They can only reach marital property, and the assets in your trust belong to the trust, not to you personally.

That means you can manage it and enjoy it, but it’s shielded from others. It’s like a financial fortress.

If you blow through it in Vegas, that’s on you, but as long as the money stays in the trust, no one can take it from you. Pretty nice, right?

You can’t create this protection for yourself, your parents have to set it up for you. That’s why it’s called a family trust. It’s estate planning that helps not only your parents, but also you, and potentially your kids.

In some states, like Pennsylvania and New Jersey, these trusts can continue for generations. During your lifetime, you might not even need the money, it can just grow safely. It’s comforting to know you have funds tucked away that no one can seize.

When you pass away, the trust can continue for your children. If you’re in a messy divorce, getting audited, or dealing with a lawsuit, those problems affect your assets, not the trust assets. Your parents’ plan can ensure that money is immediately available for your kids to pay tuition, buy food, cover insurance, whatever they need, right away.

So you can see why this kind of planning works beautifully. It benefits your parents, it helps you, and it even supports future generations.

This isn’t new, many of my clients already have this in place. If you do, great. But if not, your trust might end when your children turn 25, or it might just give them money outright. There are all sorts of setups out there, some of which don’t make much sense.

If you want to brainstorm whether this kind of trust is a good fit for your family, call 215-790-1095, that’s our main number for New Jersey and Pennsylvania. Consultations are free. We’ll talk it through and see if it’s right for you. Our prices are reasonable, and we’re good people, happy to help.