DISCLAIMER: This blog is not meant as a substitute for legal advice. The content intends to provide an overview of the subject matter covered and is educational and informational only. There is no attorney-client relationship created because of this presentation. Don’t hesitate to contact an estate planning attorney if you wish to obtain legal advice and services.
WHY EVERY PARENT OF A MINOR CHILD NEEDS AN ESTATE PLAN.
Written By: Neil O. Anderson, Esq.
You are a parent and you wants 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 decide to finally write that will you’ve been putting off. Surely, a will can look after your kids when you’re gone? Well, partially, but it is will not offer you complete peace of mind. Instead, you need a well thought out estate plan, especially if you have a minor child.
When most people hear “estate plan,” they think of death, 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.
Basically, a will.
But an estate plan is much more than a mere plan for the distribution of 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 size of their assets.
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 an estate plan and explain why the latter is a better option for protecting your minor child.
What Is An Estate Plan?
An estate plan is a legal arrangement that spells out how to distribute or manage your property and responsibilities after your demise or in the case of your sudden incapacitation. With an estate plan, you can plan for future medical care in the event of incapacity, avoid probate court, and provide for any relatives dependent on you.
Ultimately, an estate plan is ideal for parents who wish 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 come of age.
There is simply no greater decision a parent can make than choosing who will care for their child if something happens to them. This is not to be taken lightly. 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 treat your children badly.
With an estate plan, you can prevent this.
But, you’re probably wondering, “All this sounds like something a will can take care of. So why do I need an elaborate estate plan?”
I’ll answer this below.
Why An Estate Plan Is Better Than A Simple Will.
You are young. You are healthy. You 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? If you are like many people, you may be under the misguided impression that all you need is a will or that because they do not have any or many assets, it is something they can skip altogether. Perhaps, you already have a will, but nothing else in place. None of this is uncommon. In fact I might argue that this is the norm. Unfortunately, no plan or a partial plan is simply not enough to offer you peace of mind or to 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 very important step toward protecting your child(ren) even if you’ve written your will.
In fact, 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. What if you got involved in a crippling accident and slipped into a coma? What will happen to your children? Your will cannot does not come into play while you’re still alive.
And that’s only half of it. Here are some other reasons why a will is simply not enough.
1. A Will is Mainly Concerned with How Your Money And Assets are Distributed. It does not Protect Your Money and Assets
A simple will largely concerns itself with who gets what after your inevitable departure from this world. Perhaps you will leave a million dollars to your minor child(ren) to be distributed equally when they come of age. This inheritance is a great thing for your child(ren). However, what if they have special needs, sunstance abuse issues, or are simply not mature enough to manage such a sizable inheritance? What if they have credit issues. They could squander the money, lose the money to creditors, or us it to support an unhealthy lifestyle.
A well put together estate plan can prevent that through various trust options.
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 be involved in a horrendous accident that puts you or your spouse in a coma. And although you have a will, your will cannot be enforced while you’re still alive. This means that if you’re unable to take care of your 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 will contain instructions on dealing with your medical costs and your family’s welfare. For instance, you can name a temporary caregiver for your children in the event you can not care for them for s short period of time. You can appoint a person to have power of attorney and manage your family finances until you are better. You can appoint someone to make health care decisions for you in the event you are unable to 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 the event of your absence is necessary. For instance, a will will provide for the distribution of your assets. It can be used 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 an age you dictate. However, a will must be probated. A will can be contested. A will is a public document. This 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 can be tied up. Further, once your assets are distributed they are unprotected.
Now you know a handful of reasons why creating an estate plan is far better than 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 create 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 assets. 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 not only what you have but 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 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 Last Will and Testament is still an important component to a total 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 insure that these get passed on to whom you wish by 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).
- Create A Trust or Trusts: If you’re a family with young children, it’s important to provide a pool of resources to help them achieve their dreams in your absence. Creating a trust in your 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 trust will specify how much money they’ll receive, what it can be used for, and when they can receive it. There are many types of trusts such as revocable, special needs, and irrevocable. 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 someone to oversee it, a trustee. The trustee will be the one managing the funds. Often times you will name yourself as the primary trustee as the trust is an entity that is managed 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 be able to use that property how you want to including buying and selling.
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 be 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 passing or prolonged incapacitation. The guardian could be a sole guardian, or you could appoint a long-term guardian for cases of death or a short-term caregiver for cases of incapacity or for the duration of time between your passing and the court appointing a long term guardian. A long term guardian is named 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 a person 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 should 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 guardian who is 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 of the questions you can ask yourself 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 see that your wishes are carried out. They’re the ones who’ll ensure your assets are distributed accordingly to avoid any fights or long legal battles.
- Clearly 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. 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’re done itemizing your wishes and selecting your guardians, you need to create the documents that grant them the power to legally make these decisions in your absence — within a provided limit, of course. These documents are called directives.
Popular directives you’d need 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 will become your health care agent and make medical decisions on your behalf when you’re sick or injured.
- A durable financial power of attorney: This allows an appointed person or guardian to make financial decisions and manage your finances on your behalf 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.
Make sure your trustees and guardians can be trusted. Communicate with them and make sure they agree to play those roles. Strongly consider appointing backup guardians and trustees as well in the event your first choices are unable or unwilling to serve.
Your estate plan can be revised as much as you want during your lifetime. Therefore, you should prepare yourself to review your place after a period of time. This is important 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. An estate planning professional can advise you on special 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 is filled with DIY tools, tips, and services for creating and legalizing your estate plan. In fact, up front 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 pale in comparison to probate fees, tax consequences, family conflict, and other ramifications if your plan is not done right. Most law firms offer blogs like this and many DIY legal websites also have blogs and educational resources. These are wonderful sources of information but not a substitute for legal counsel and professional document preparation. A weel qualified professional estate planning lawyer will be there to guide you through the entire planning process, including signing and notarizing your estate plan.
- A special note for Moms and Dads
Dear Moms and Dads,
I am a Dad myself. If fact it is the greatest role, privilege, and honor I have ever played. I know that even with the best of intentions, sometimes planning is hard.
You are busy. You work. You run a business. You transport your children to and from school and after-school activities. You have a side hustle. You’ve got diaper changes, nightly feedings, and so much more. It is a lot to juggle, and there is so much on your plate. You are so tied up with the present that it is difficult to focus on the future.
As a Dad and a business owner, I know how it feels. I too have procrastinated on important decisions and actions necessary to secure my son’s future. It was not until the loss of a dear, lifelong friend who passed without an estate plan that I fully realized the importance and magnitude of having a great plan in place.
It’s understandable that you have not found the time to do an estate plan or to revisit your existing plan. However, taking this important step and making plans for the future of your children and loved ones cannot be over-emphasized.
That’s why I’ve created an estate planning service that caters to your unique schedules and circumstances. We provide free, no obligation 15 minute consultation via Zoom, Google Meet, Whats App,Facebook Messenger, or telephone or a 30 minute face to face meeting. Our office is child friendly, dog friendly, and handicapped accessible. It is my goal to make planning easy and accessible.
If you have yet to plan at all or just want to revisit an existing plan, take advantage of this offer.
It’s time to secure your child’s future.
Feel free to contact Envision Estate Planning LLC at 781-874-4674 for more information or to set up your initial consultation. We will work hard to provide you with up-to-date and accurate information and serve you in any capacity we can.