Six Estate Planning Tips for Families
Welcoming a new member into the family marks the onset of important responsibilities in caring for your child. One of these responsibilities is making sure you have provided basic protections for your child in the event something should happen to you.
For parents, creating an estate plan is the most important thing you can do to make certain your child is cared for if anything should happen to you. Among other things, a well-crafted estate plan will allow you to designate a guardian to care for your children if you die before they become legal adults. You can also designate a trustee to manage your money after your death, and establish at what age and for what purposes it should be distributed to your child.
Here are six tips to help you begin the process of estate planning:
- Consider a Guardian for Your Child. The guardian will have custody of your child and effectively raise the child for you. Pick someone who is willing to take on the responsibility and who is able to provide quality care for your child. You should also consider your personal parenting philosophy and that of any prospective guardian.
- Consider Your Child’s Financial Needs after Your Death. A children’s trust prevents a child’s inheritance from being placed in a locked account controlled by the court. The trustee of the trust is responsible for managing the funds that will be used to raise your child. In the trust document, you can designate an age at which you would like your adult child to inherit the assets of the trust. For example, some parents find that 27 is a more appropriate age to inherit a lump sum of money than 21. Your beneficiary designations should reflect the existence of this trust.
- Revise Beneficiary Designations. Make sure that your spouse, partner, and children are designated as beneficiaries and contingent beneficiaries on any life insurance policies, retirement accounts, or other beneficiary-designated assets.
- Create a Durable Power of Attorney for Medical and Financial Decisions. If you become disabled or incompetent, a Durable Power of Attorney gives the person you designate the power to make decisions on your behalf and to manage your affairs. A Health Care Directive tells medical professionals what artificial life-sustaining treatments you do or do not want.
- Maintain a Current List of Your Assets and Key Documents. Make it easy to determine what you have and what you owe, and don’t forget about digital assets: work product, intellectual property, and those digital photos. Keep a master list of accounts and assets owned, insurance policies held, and important legal documents. Let your Personal Representative or Attorney In Fact know where this list can be found.
- Annually Review Your Estate Plan. Tax time is a good time to review your documents. Some helpful questions that can determine the need to revise documents are: 1. Do I have any new family members? 2. Is anyone that is currently named in my documents no longer the appropriate choice for the role I have given them? 3. Has my net worth changed significantly?
Written by Megan Gebhardt