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Estate Planning with Young Children: 4 Simple Steps to Better Protect Your Family
As parents, there is nothing we want more than to know our children will be well taken care of at all times, no matter what. Thinking about the “what-ifs” of life can be scary, but being prepared for them is necessary to protecting your children. The COVID pandemic has shown us that life is unpredictable, and that it’s better to be over-prepared than not at all. Estate planning for families is a critical step in ensuring that your children are protected—both financially and medically —even if both parents become incapacitated, or worse.
Here are four initial steps to ensure your children will be taken care of in the event of tragedy:
- Draft Your Will
For those without minor children, drafting a will is mostly about naming the beneficiaries of your various assets. However, when minor children are involved, a Will plays an important role in outlining who should assume legal guardianship of your children in the event that both parents become incapacitated or die. In this event, the guardian named in your Will should be court-appointed as the legal guardian of your children.
However, if you do not leave guidance for the guardianship of your children in your Will, then the court will appoint someone based upon other factors, rather than by your preference.
- Purchase Life Insurance
When it comes to estate planning for families, purchasing life insurance can help protect minor beneficiaries. The life insurance payout could ensure that the surviving parent or guardian has access to the money needed to support your young children.
Even if nothing tragic happens to you while your children are minors, life insurance provides peace of mind knowing that money will be available to help a surviving spouse, your adult children, or whomever you decide to name as a beneficiary.
- Write Durable Powers of Attorney (POA) AND a Living Will
No matter your marital or parental status, every single adult person should have both two different POAs and a Living Will, also called a Directive, in place. If you were suddenly in an accident—or were to become ill to the point of incapacitation—these documents would make the situation immensely easier to protect you and your family.
POA’s are split into two separate documents: medical and financial. A Medical POA gives a trusted person the authority to make your medical decisions for you if you do not have the mental capacity to make them yourself. A Financial POA gives a trusted person authority to make decisions regarding your assets and finances and the ability to deal with liabilities. For example, this person would be able to pay your mortgage, utility bills, or conduct legal transactions, etc. This document would give you peace of mind knowing that your finances would remain on schedule, without your family having to seek a court order.
A Living Will, or Directive, outlines your wishes for end-of-life care. It applies when you are in a hospital at the end of your life with either a terminal condition or an irreversible condition. For example, what happens if you need a feeding tube, or to be kept alive via ventilator? You can provide as much (or as little) detail as you wish. This document is completely your own, and pertains only to your wishes for end-of-life healthcare.
- Designate Beneficiaries for Financial Accounts
In some cases, you may not want certain financial accounts to go through probate via your Will. If you name a beneficiary on a financial account, it will pass at your death automatically without the need for probating of your Will. But, what happens if you simply name your minor child as a beneficiary? Things could get very complicated and the court will have to get involved. It is very important to have an integrated estate plan that addresses not only assets that will be probated and assets that will not pass through probate but, most importantly, how to make sure these assets are held by someone you trust for the benefit of your children. If you do not address this, the court will and it may not turn out the way you wanted.
There are several ways of dealing with this issue, but one of the best is setting up a trust, which enables you to name a Trustee to distribute assets to your children on your own terms, for example, after reaching certain life milestones, or when they reach a certain age, etc. and there is no need for court intervention. When it comes to trusts, it’s best to speak with an estate planning attorney as there are MANY different types of trusts and an estate planning attorney can provide you with the best options for you and your family.
While thinking about the unthinkable can be difficult, it’s important to draft an effective and integrated estate plan to protect you and your children…and your wishes for them! If you have questions, or are interested in setting up an estate plan, please contact us or complete the brief form below to send a message to our legal team.