Why Do Parents With Children Need An Estate Plan

You are a parent, and you want what's best for your child(ren). You want your children to be comfortable and cared for, even after you die at a ripe old age. So you finally decide to write your Will you've been putting off. My Will will provide me peace of mind that my children will be provided for, right? Partially, but it will not offer you complete peace of mind. Instead, you need a well-thought-out estate plan, especially if you have a minor child or minor children.

When most people hear "estate plan," they think of where their assets go after they die, adult children squabbling over their possessions and their prized collection of antique Japanese porcelain figurines ending up in the attic of a beloved family member. They think of a Will.

An estate plan is much more than a mere plan for distributing your tangible assets at your demise. It not only involves discussing and stipulating what happens to one's assets when they pass away; it also contains instructions for protecting business assets, avoiding unnecessary taxation, avoiding costly legal fees, and taking care of your kids. It is something every parent of minor children and any adult should consider, regardless of the number of their assets or the size of their estate.

Estate planning is your ticket to protecting and providing for your children when you're not in the picture or can't be there for them due to certain unforeseen circumstances.

This article will discuss the importance of having an estate plan for a young family with kids. We will also differentiate between a simple will and a complete estate plan and explain why the latter is a better option for protecting your minor child(ren).

What Is An Estate Plan?

An estate plan spells out how to distribute or manage your property and responsibilities after your death and in your lifetime. It comprises multiple documents, not just a last will. With an estate plan, you can plan for future medical care in the event of incapacity, avoid probate court, save on taxes, insulate yourself from creditors, and provide for any loved ones dependent on you.

Ultimately, for parents, an estate plan is the only way to protect their minor children when mom and dad aren't there. It provides them the opportunity to gather funds for their family's upkeep in the event of their unavailability. Parents also get to pick a suitable guardian to look after their children until they reach the age of majority.

There is simply no more significant decision a parent can make than choosing who will care for their child if they cannot. This decision is of the utmost importance. Parents who fail to consider this leave their child(ren) unprotected, and the Court will ultimately decide who will care for their child(ren).

This person might be someone you wouldn't ordinarily pick to raise your kids in normal circumstances. They may not follow your ideals or respect your way of teaching your kids. Or worse, they mistreat your children.

With an estate plan, you can prevent this.

But, you're probably wondering, "All this sounds like something a Will will provide. Why do I need more than that?"

I'll answer this below.

A Complete Estate Plan Is Better Than A Simple Will.

You are young, healthy, and do not yet have many assets. The idea that you need an estate plan is ludicrous; after all, you aren't going anywhere yet, right? Like many people, you may suffer from the misguided impression that all you need is a Will or that because you do not have many assets, you can skip altogether. Perhaps, you already have a Will but nothing else in place. None of this is uncommon. I might argue that this is the norm. Unfortunately, no plan or a partial plan is not enough to offer you peace of mind or keep your family out of Court and out of conflict.

If you are a parent and do not yet have an estate plan, do not delay taking this essential step toward protecting your child(ren) even if you've written your Will.

A Will is a small piece in the vast jigsaw of any estate plan. It only comes to effect after your death, and that's what makes it inadequate. Your Will does not come into play while you're still alive. What if you got involved in a crippling accident and slipped into a coma? What will happen to your children?

And that's only half of it. Here are some other reasons why a will is not enough.

1. A Will is Mainly Concerned with the Distribution of  Your Money And Assets. It does not Protect Your Money and Assets

A simple Will primarily concerns who gets what after your inevitable departure from this world. Perhaps you will leave a million dollars to your minor child(ren) to be equally distributed when they come of age. This inheritance is an excellent thing for your child(ren). However, what if they have special needs, substance abuse issues, or are not mature enough to manage such a sizable inheritance? What if they have credit issues. What if they marry and then divorce? The hard-earned money that you worked a lifetime to provide for your children could be squandered, lost to creditors, used to support an unhealthy lifestyle, used to pay for avoidable taxes and legal fees, or distributed to unintended beneficiaries.

A well-thought-out and assembled estate plan can prevent many or all possible adverse outcomes.

2. A Will Applies After Your Death.

Sometimes, death isn't the only event that'll take you away from your children. For instance, you could have a horrendous accident that puts you or your spouse in a coma or suffer from a debilitating illness that prevents you from being able to care for your child(ren). Though you have a Will, your Will is unenforceable while you're living. If you cannot take care family or oversee the welfare of your children for some reason aside from death, your Will cannot help you sort it out.

Although you could review and revise it in your lifetime — it's ambulatory — you can't depend on your Will to help support your family before your demise. An estate plan is far superior in such situations. Your estate plan can be enforced in your lifetime and contain instructions on dealing with your medical costs and your family's welfare. For instance, you can name a temporary caregiver for your children if you can not care for them for s short period. You can appoint a person to have power of attorney and manage your family finances until better. You can nominate someone to make health care decisions for you if you cannot do so. None of this is possible with just a Will.

3. A Simple Will May Offer Partial Protection.

Taking care of your kids and planning for their future in your absence is necessary. For instance, a Will provides for the distribution of your assets. It allows you to name a long-term guardian for your child(ren). You can assign a person known as a trustee to distribute the assets to your child(ren) for their benefit until they become of the age of majority or age you dictate. However, a Will passes through Probate Court. A Will is a public document. It is contestable. A Will alone can be costly and sometimes creates strife in your family. It also takes time to sort out, sometimes months and sometimes years. During this time, your assets are not able to be distributed. Further, once distributable, your assets have few protections.

Now you know a handful of reasons why creating an estate plan is superior to making a simple will. Next, we shall review the steps you or you and your partner need to take when creating an estate plan.

6 Steps To Basic Estate Planning For Parents Of Minors

Making your first estate plan can seem like a daunting task. You might not know what risks to guard against or how. So many questions might run through your mind at once, "What provisions should I make for my children in my estate plan?" "Who should I appoint as a guardian?" "Should my kids have two guardians?"

Don't fret; an estate plan is not as complicated or challenging as it seems. With careful thinking, a genuine urge to protect your family, and some professional help, you can construct the perfect estate plan for yourself and your family.

Here are a few steps to take when planning your estate as parents of minors.

1. Make A List Of Your Assets

As a young family, it's easy to think that you don't have enough property to bother with an estate plan. And you probably don't count your collection of vintage train models when you think of tangible property of value. But that's not true. You have assets all around you. They aren't only physical (like your house). They could be in other forms (like stocks and equity). You have enough. All you have to do is create an inventory of what you own.

Some examples of tangible assets include:

• Cash
• Shop inventory (if you run a sole proprietorship)
• Land or another real estate
• Vehicles
• Equipment and household appliances. Yes, your toolbox is an asset
• Your home
• Cash
• Art pieces or other collectibles like baseball cards
• Other personal possessions

Intangible assets you can add to your plan include:

• Patents
• Copyrights
• Life insurance
• Money in your accounts
• Stocks and bonds mutual funds
• Pension plans (your 401(k) in your workplace or any individual retirement plan)
• Health insurance
• Business equity or ownership

2. Add A Figure To Your Assets.

Once you're done making a list, put a value on your assets. It's easy to estimate the value of assets like your house, car, and the amount of money in your checking accounts. But, other assets like stocks and equity might be a tad difficult. Don't sweat it, though. You only have to make an estimate; it does not have to be perfect. If you do not have many assets right now, it is okay. A good plan considers what you have and what you will have.

3. Make Provisions For Your Family.

You know what you have and how much you're worth. It's time to address the crux of the matter — protecting your family and providing for their needs.

First, you have to know that the way you'll provide for an adult child should differ from that of a minor. Your underage children need special care and enough funds to see them through a good education.

Here are some fundamental ways you can provide for your family in an estate plan:

• Begin with Your Last Will and Testament: Now, if you have read the above,  you must be thinking, why? A Will is still an essential component of a complete estate plan. Even if you pass on a majority of your assets through Trust, personal property and residual assets that may not be in Trust can still pass through a Will. The Will will ensure that these get passed on to a personal representative of your choice to whom you wish. It will still go through probate, but if the rest of your plan is sound, it will minimize legal costs for your beneficiaries. It is also, very importantly, the medium through which you will be able to name a long-term guardian to care for your child(ren) in the event of your untimely death.

• Create A Trust or Trusts: If you're a family with young children, it's essential to provide a pool of resources to help them achieve their dreams in your absence. Creating a Living Trust as a part of your overall estate plan can help you allocate money to your children, a charity, or other beneficiaries. If the estate you leave behind is large enough, it may also save you from paying unnecessary taxes. Typically, the Living Trust will specify how much money they'll receive, what they can use it for, and when they can receive it. Trusts come in “many shapes and sizes”. Your estate planning professional can advise you on what makes the most sense for you and your family.

Setting up a trust also means you'd need a trustee to oversee it. The trustee will be the one managing the funds. Often you will name yourself as the primary trustee as the Trust is an entity controlled in your lifetime, not just when you pass. For instance, let's say you put real estate in Trust. Technically, you no longer own that asset. Your Trust does. However, if you have a revocable trust, you maintain control and continue to use that property how you want to, including buying and selling.

A Trust is private. It does not pass through Probate Court and is much more difficult and costly to challenge than a Will. It can serve to insulate your assets in a manner that protects them from unintended beneficiaries.

Another great way to look out for your family is to include an insurance policy in your estate plan. A good life insurance policy ensures your children's future by helping them offset their bills and providing financial assistance for their education/upkeep.

Typically, your children can inherit your life insurance when they reach their majority, that is, 18 or 21. However, you can name your Trust as the beneficiary, and the money is held in Trust or used in Trust for your child(ren) 's benefit by a trustee until your child reaches a certain age that you determine.

• Appoint A Guardian For Your Children: Your estate plan should include the names of guardians for your children in the event of your death. It should also name short-term caretakers in the event of prolonged incapacitation or to provide for your child(ren) during the period between your passing and the Court appointing a long-term guardian of your child(ren). You will nominate a long-term guardian in your Will. The process for naming a short-term caretaker is different but equally important. It can provide peace of mind that your children will never be in the care of someone they do not know.

Your guardian should be someone you know and someone who has a good relationship with your family and your children. They should share your values and display a genuine desire to care for your children.

Your children's guardian can double as a trustee (or not), which means they could also be in charge of all the financial decisions (or not).

A person appointed for the sole purpose of making financial decisions in your absence is called a  trustee. Your trustee could be your spouse, family member, or a trusted friend.

Here are some questions you may consider when choosing a guardian for your children:

• Do they live near your home, or would they consider relocating to stay with your kids? This question is important because moving your child from all they've known could cause problems.
• Are they mentally sound?
• Do they have good morals?
• Would they maintain the standard of living you've set for your children?
• Are their finances stable?
• Do they like kids?

You should note that a guardian is vastly different from an executor or personal representative. An executor or personal representative of an estate plan is someone you've appointed to carry out your wishes and distribute the assets in your estate to your intended beneficiaries. They are responsible for paying off any outstanding debts and legal fees and then distributing your assets according to your wishes.

• State How You Want Your Children Raised: It's not enough to assume a guardian shares the same values with you and will raise your children the way you'd do. Be sure the people you have named know you have nominated them for this vital role and communicate and discuss your wishes with them. To be on the safe side, add your wishes and instructions to your estate plan so it's never in doubt.

4. Create The Necessary Legal Directives.

Once you complete itemizing your wishes and selecting your guardians, you need to create the documents that grant others the power to legally make these decisions in your absence — within a provided limit, of course. These documents are called directives.

Directives you may consider in your estate plan include:

• A Living Will or a medical care directive: This document contains instructions for when you're unable to make decisions due to sickness or injury.
• A Health Care Proxy names a person you trust as your representative in matters concerning your health. This person has the authority to make medical decisions on your behalf if you're sick or injured.

• A Durable Financial Power of Attorney: An appointed person is able to make financial decisions and manage your finances for you in the event of your inability to do so. They'll also pay your bills to deal with debts and other financial affairs.

• A Limited Power of Attorney: You can use this document if you're skeptical about handing over your financial or medical decisions to someone else. With a limited power of attorney, you can restrict your appointed trustee to a particular role. For instance, you can decide that they can only pay your bills and not collect rent from any property you own.

5. Crosscheck Your Plan.

Before legalizing an estate plan, review the document thoroughly. Crosscheck your assets, beneficiaries, guardians, and trustees.

Do the trustees, guardians, health care proxies, personal representatives, and caretakers want to serve? Have you communicated with them to ensure they agree to play those roles? Have you named alternate candidates? Strongly consider appointing backup guardians and trustees as well in the event your first choices are unable or unwilling to serve.

Revise and revisit your estate plan as much as you want or often as needed during your lifetime. This step is vital because proposed guardians who are a good fit today may not be a good fit in a few years, your marital status may change, or your assets might increase. Therefore, you should prepare yourself to review your plan periodically. An estate planning professional can advise you on particular circumstances such as moving, receipt of a large inheritance, law changes, ar other reasons that might necessitate revisiting your plan.

Either way, put a recurring estate plan review date on your calendar.

6. Seek Professional Help.

The internet has many DIY tools, tips, and services for creating and legalizing your estate plan. Upfront, you can save a lot of money. However, doing it this way leaves a lot of room for error, and the money you save on the front end may not compare to probate fees, tax consequences, family conflict, and other ramifications if your plan is all wrong. Most law firms offer blogs like this one, and many DIY legal websites also have blogs and educational resources. These are fantastic sources of information but not a substitute for legal counsel and professional document preparation. A well-qualified, professional estate planning lawyer will be there to guide you through the entire planning process, including signing and notarizing your estate plan.