Estate Planning For Young Families
Many people put off estate planning, especially young families. This is typically due to people thinking they’re too young to begin estate planning, too healthy, or thinking they can’t afford it.
Many also have trouble thinking of their death or what would happen to their family or minor children if they were to pass away. Keep in mind that even young, healthy adults can pass away suddenly due to an accident or unexpected illness.
Obviously, you’re not planning on passing away while you’re young and have people to care for, but planning for the unexpected is responsible, and it’ll show your family that you care for them. If you don’t have an estate plan for your young family, you could potentially leave them a big mess to clean up.
A thorough estate plan for a young family typically includes naming someone to manage your estate after your passing (Personal Representative) and your Trust (Trustee). It should also name a guardian for any minor children, name someone to manage their inheritance until they become an adult, and provide instructions for distributing your assets. You may also review your insurance needs and plan for potential future disability.
Naming an Executor for Your Estate and a Trustee for Your Trust
The Executor of your estate and a Trustee for your Trust have similar roles. They’re responsible for handling your final matters, such as locating assets, valuing assets, paying bills, distributing assets, hiring an attorney, and more. Since there are so many responsibilities that come with these roles, you should choose someone you trust who is responsible, willing, and able to carry out your final wishes. This person could be your spouse, sibling, or even a friend. You should also consider backups if the person you named is unable or unwilling to serve. The Executor and Trustee do not have to be the same person, although they can be.
Naming a Guardian for Minor Children When Estate Planning for Young Families
You should name a guardian to care for your minor children in the event that you pass away. If one parent passes away, the other parent will typically continue to raise the children unless they are unable to do so.
However, you’ll need to consider who will take care of your children if something were to happen to both of you. This can be a difficult decision, but if you don’t name a guardian and you both pass away, the court will appoint someone on your behalf without knowing your wishes.
Providing Instructions for Distribution of Your Assets
Typically, most married couples would like their assets to be left to their surviving spouse if they were to pass away. However, if both parents were to pass away and have young children, you might want to use your assets for their care. Some assets transfer automatically to beneficiaries by the use of beneficiary designations. However, you should still create an estate plan for your young family in the event that your surviving spouse dies or becomes incapacitated so assets can be used for the children.
Naming Someone to Manage Your Children’s Inheritance
The court will appoint someone for you if you don’t appoint someone to oversee your children’s inheritance. The person appointed will more than likely be a professional guardian, and it will cost money that will be paid from the inheritance. Your children will receive their money when they become adults unless you specify another age. Parent’s typically prefer when their children inherit the money when they’re older so the funds can be used for different needs. Creating a Trust will help you reach these goals and select someone you know to manage the inheritance. The person can be the same as the guardian, but it does not have to be.
Reviewing Insurance Needs
A large part of estate planning for young families is reviewing the life insurance needs for both parents. Any income earned by one or both parents would need to be replaced by life insurance. Keep in mind that someone would need to take over the responsibility of a caretaker. You may want to add additional coverage for your children until they’re grown, especially if you want to pay for college.
Planning for Disability
One or both parents can become disabled due to an unexpected injury or illness, so you should also plan for this. Both parents should have a Financial and Medical Power of Attorney that appoints someone else to make financial and medical decisions on your behalf if you cannot make the decision for yourself. You would likely name your spouse as your agent, but you should name a successor agent in the event that your spouse is unable to serve. You should also prepare a HIPAA Waiver for other family members to gain access to your medical information. In the event of disability, you should consider disability income insurance because life insurance does not pay for disability, only death.
Summary of Estate Planning for Young Families
Estate planning for young families will force you to think about uncomfortable life and family situations, but an experienced estate planning attorney can help you through the process and guide you to make sure you have everything you need. If you’re in a tight financial situation, start with only essential legal documents and life insurance, then update your estate plan as you go. The most important thing is to not put off estate planning for young families. If you don’t have a plan, you can put your family in a challenging financial situation and potentially delay accessing assets. Once you have an estate plan in place, you’ll have peace of mind if something were to happen to you.
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