4 Simple Estate Planning Ideas Parents Need to Consider
Have you put off creating an estate plan because it seems depressing? Or perhaps you don’t agree with your parenting partner over who should get custody of the kids should something happen to you? Mariah Daniel, Estate Planning Attorney with the Daniel Law Office, has some motivation for you, “Think about how your kids would feel knowing you did nothing, or knowing that you did your best.”
Don’t let perfectionism prevent you from taking action. If you don’t have a guardianship plan for your children, the state does. And you may not like it.
The good news is it’s really easy to get this taken care of, and you will feel such a sense of relief when you are done. No more mommy-guilt over this! (Or dad-guilt! We’re equal opportunity guilt-ers here.)
Today, we will go over 4 questions to discuss before you meet with an attorney to make your meeting more effective.
Let’s dive in.
Question #1 Who should get guardianship of your children?
This can sometimes be a difficult decision for couples (or parents who are no longer together). As Mariah Daniel points out, “It’s so painful to think about your children being alone or you not being able to raise them yourself.” Painful - and completely necessary.
The good news is, once my husband and I took care of this for our kids it felt like a weight was removed from our shoulders.
It’s important to note that the judicial system always has the final say. Certainly, the judge will try to uphold your wishes. However, it’s possible you could name someone as a guardian in your will but they are deemed unfit by the court. If that happens the judge will not grant them custody.
It’s a good idea to name several back-up guardians in your will in case the named guardian is unable or not eligible to step in.
Question #2 Can I split custodian guardianship & financial guardianship?
Yes, you can name a guardian to have custody of your children and name someone else to manage your assets on behalf of your children. Sometimes you have an individual in mind who would be great with the kids but struggles with money. You can name different people for each of these roles.
If you have significant assets, you may wish to consider a carefully drafted trust to manage your assets for your children after your death. Your financial planner in conjunction with your estate planning attorney can help you determine the best course of action.
Question #3 How do you want your assets to be distributed after your death?
If you have a retirement plan or investment accounts, those assets will pass to the beneficiary you named on your beneficiary form. The same thing applies to your insurance policy. Whoever is the named beneficiary will receive the death benefits.
For example, let’s say you were married and named your spouse as your beneficiary. You had kids together and eventually got divorced. If you don’t change your beneficiary designations then your ex-spouse would inherit your accounts or life insurance proceeds instead of your kids.
So make sure those beneficiary designations are up-to-date!
Anything that does not have a beneficiary listed will be distributed according to your will. Or state law if you don't have a will. If you use a will your estate will pass through probate. Probate is the process of presenting a will for acceptance at the courthouse and means that the will becomes a public record.
Technically, anyone can review probate proceedings.
If you want more privacy, you may wish to set up a revocable living trust. Talk to your financial planner or estate planning attorney for more details on how revocable trusts work.
Question #4 Do you have a significant assets that you want to pass down to your heirs? Or moderate assets and very young children?
If so, you may want to consider a testamentary trust. A testamentary trust can be established under your will. This means that your will specifies the details of how the trust will be set up. Creating a trust in your will does not avoid probate. With this type of trust you can name someone to serve as a trustee to manage the assets for your heirs. A trustee has a fiduciary responsibility to your heirs and is bound to carry out your wishes as dictated in the trust document.
Carefully drafted trusts can provide protection for your heirs from creditors, angry ex-spouses, and unsavory friends, should the need arise. Each trust is unique, so it would be best to discuss the possibilities with your estate planning attorney.
A Few Other Estate Planning Considerations for Parents
Other important documents to include in an estate plan include a Durable Financial Power of Attorney and an Advanced Medical Directive or Healthcare Power of Attorney. A Durable Financial Power of Attorney allows you to name someone to make financial decisions for you should you be incapacitated or otherwise unavailable. An Advanced Medical Directive allows you to specify to your family what medical treatment you would (or would not) like. With an Advanced Medical Directive you can also let your family know under what circumstances they should allow your life to end. Or not, perhaps you wish to be “plugged in” indefinitely. A Healthcare Power of Attorney can make medical decisions for you on your behalf.
Having trouble starting this conversation with your partner? Your Fee-Only financial planner can help.
Financial planners can provide you education around estate planning tools and help you work through your values and goals. Then an estate planning attorney can provide you with additional insight, map out the specifics of your estate plan, and draft your documents.
A qualified estate planning attorney can make sure that your children and spouse are properly taken care of should anything happen to you.
This is definitely worth it, don’t put it off any longer!
No attorney-client privilege has been provided by this post and this post does not constitute legal advice. It is important to speak to an experienced, licensed attorney in your state to obtain legal advice.
Wow, thank you for informing me that you can split up custodial management into specific roles such as financial guardianship. About a week ago, I was talking with my husband, and we were wondering what would happen to our money and our kids if we both passed unexpectedly. Obviously, we want the best for our kids. We never thought about your advice to split up responsibility. I have no idea how to do that. Maybe we should look into probate attorneys that could help us out.
My husband and I recently had our third child, and it has made us think about how our estate will be split up when we are gone. Thanks for mentioning that it’s important to make sure that your beneficiary designations are current. We will have to talk to an estate planning lawyer about putting beneficiaries in place and keeping them updated if we have more kids so that everything can get split up evenly.
Congrats on the birth of your third child. You are right, it’s important to update your estate documents any time you have a major life change.