If you have minor children and still don’t have an estate plan in place, here are five reasons why building one now makes sense.
1. Designated an appropriate guardian: If you are a new, young parent, the concept of not being able to raise your children and attend their college graduations may be difficult to handle. Understand that naming a close relative as a godmother and godfather does not carry the same legal authority as naming a guardian for your child in your Will. Should you become incapacitated or die unexpectedly, your estate plan can designate a guardian to care for them. In selecting your guardian, choose someone who shares your values and will raise your children the way you would do yourself.
For parents will minor children, this is the most important estate planning task you can accomplish. If you accomplish nothing else, have a Will and designate your guardians. Not sure how to get the conversation going with your spouse on this topic? Here are a few discussion points that may guide you on who would be best suited for this role:
>> Which people are physically able to care for your children?
>> Which people have the time and emotional disposition to care for your children?
>> What is the physical location of your potential guardians? If you children are established in school, will you want to move them immediately. If they do not live close, will they be willing to relocate?
>> Are this person’s finances and relationships stable? Keep in mind that you may be able to adequately provide for your children with existing assets or life insurance, but consider whether your guardian should also be in charge of your children’s finances.
While answers to these questions may change over time, you can always change your designated guardians as well. If you are not able to raise your children, don’t leave surviving family members wondering what your wishes would have been. And in the event of a dispute over who would be best suited as a caregiver, don’t leave this decision to the courts.
2. Designated an Agent for Your Health Care Decisions: Now that you have taken care of your children, take care of yourself. Advance Health Care Directives (AHCD) for you and your spouse are a necessary second step in any estate plan. Don’t assume you know and understand your significant other’s wishes. Don’t leave them guessing as to what medical treatments you may or may not want to receive in the event of a catastrophic injury or illness. But AHCD are so much more than addressing end of life decisions. They necessitate the exchange of medical history that may prove vital for your care in the event you are incapacitated. For more information, see our blog on AHCD’s.
3. Designate an Agent for Your Financial Decisions: Again, it’s important to remember that estate planning is not only done for people who are terminally ill or nearing the end of their expected life. Just as important is addressing situations where you are temporarily sick or injured and can’t make decisions for yourself. To do that, you need a durable power of attorney (DPOA), and if you are a business owner, a business succession plan. A DPOA is separate from medical powers of attorney and allows your designated agent to make financial decisions on your behalf if you become incapacitated. If you are a business owner, make sure you have a plan in place to maximize your ownership interest for your family’s benefit if you are unable to do so yourself.
4. Establish a Trust. Trusts, more so than a Will, are effective estate planning tools for children. When your estate passes through a Will, you lose control over how those assets are used. Moreover, minor children are not legally competent to directly inherit. In the absence of a Trust, the Court will appoint someone to manage the assets you have left for them. Assets placed in a Trust are managed by one or more individuals or entities of your choosing. You can create conditions and rules for how these funds are spent and designate a timeline for when the assets are eventually turned over to your children. For example, if you have already acquired significant wealth (or anticipate doing so), you could arrange for distributions to be made over a period of years, instead of one lump sum when they reach the age of 21. You could also designate certain funds for college or other purposes. This can give you piece of mind that funds designed for their care will be used for their care. Also consider that if your spouse remarries, you have some protection that his or her new partner will not use the funds for some other purpose.
5. Carry Adequate Insurance. Life insurance, medical insurance, disability insurance, insurance for your home, auto, and business; all of these deserve your consideration. Raising children is expensive. If you become disabled, particularly if you are the primary breadwinner for your family, consider how you will be able to continue to provide for your family. Likewise, if you pass, life insurance can provide funds to raise your children to adulthood and/or to fund the cost of a college education. Note that in conjunction with our prior discussion on Trusts, a Trust can be named as the beneficiary of a life insurance policy so that you have greater control over how the life insurance proceeds are used.
Takeaway
No parent ever wants to plan for a day when they won’t be there for their children. It does not have to be a painful or time-consuming process, and it can offer you the peace of mind to live your lives. If you are a single parent, the above five things are even more critical. Contact CASHMAN LAW today for a free consultation to see how we might guide you through the estate planning process.
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