Estate Planning for Young Families
By Joellen C. Meckley, Esq.
Many people don’t consider estate planning until they get married or have their first child. It’s natural to resist considering your own mortality until it occurs to you that your untimely death could seriously jeopardize the well-being or financial security of someone else. Particularly for young parents, that realization is enough to keep you tossing and turning at night, however, a well-written estate plan can put those worries to rest.
There are 6 basic components to a simple and thorough estate plan for someone with young children. A qualified estate planning attorney can help you sort through all of them and decide which steps are necessary given the unique facts of your situation.
- Write a Will
A will, in its most basic form, directs who will inherit your assets when you die. Some assets pass to your beneficiaries when you die regardless of whether or not you have a will, such as joint bank accounts, real estate owned jointly, or any other assets for which you can name a payable on death beneficiary. Other assets will pass to your heirs according to state law if you die without a will. Having a simple will in place enables you to dictate clearly and definitively who will inherit your property and assets when you die. Taking the time to think ahead about how your property will pass on to those you love and then legally documenting that plan also can potentially save your loved one thousand’s of dollars in taxes if done correctly.
- Appoint a Guardian
When you have young children, one of the scariest scenarios to contemplate is what will happen to them if something ever happens to you. It can be an uncomfortable conversation to have with your spouse and the rest of your family or friends – but it’s a conversation that needs to happen. When children are involved, one of the primary reasons to have an estate plan is because it gives you a vehicle by which to officially appoint the person of your choice to serve as guardian in the event that you and your spouse are unable to care for them. An experienced estate planner can help you work through that decision making process.
- Buy Life Insurance
While an estate planning attorney won’t be selling actual insurance products to you, he or she should be asking you about any life insurance you already have in place and will make sure that the potential proceeds of that life insurance policy are fully incorporated into your estate plan. Term life insurance is often a smart, affordable way to ensure that your loved ones can remain financially stable after your death, and it’s absolutely essential that it be taken into consideration when drafting your estate plan.
- Appoint Retirement Account Beneficiaries
When you nailed down that first “real” job, hopefully you were lucky enough to sign up for some sort of employer sponsored retirement plan, or perhaps you have an IRA. Many people don’t realize that if a retirement plan passes directly to your estate upon your death, the proceeds from that account will be subject to significantly higher taxation than if the proceeds passed directly to a named beneficiary. An estate planning attorney can help you go through your current retirement plans to help you determine the most optimal way to distribute those funds to your beneficiaries upon your death.
- Include a UTMA provision or a Trust
Providing for your children in the event of your premature death requires more than just choosing someone to serve as their legal guardian. You also need to plan for what will happen to any money that your minor children inherit from you. One common way to address this in an estate plan is to choose who will manage your children’s money under your state’s Uniform Transfers to Minors Act (UTMA), which will enable their money to be managed by a custodian up until the maximum age permitted under state law (often age 21). Alternatively, you can include a trust in your will which would enable you to appoint a trustee to manage your child’s property and money until whatever age you specify. Your will can be drafted to include a UTMA provision or a trust, either of which can meet your needs depending on the unique circumstances of your family and your children.
- Durable Power of Attorney and Advanced Directive
The final component of a basic estate plan is to plan for your potential incapacity. In the event that you are unable to manage your own financial affairs, a durable power of attorney enables you to appoint an individual to have the authority to manage it on your behalf. A similar document should be executed appointing someone to act as your health care decision-maker in the event that you become incapacitated and cannot speak for yourself. With a valid power of attorney, the person who you trust will be legally permitted to take care of important matters for you.
The attorneys at Yardley Estate Planning LLC are ready to meet with you to discuss your family’s estate planning needs at any time. We look forward to walking you through the process to ensure that your family’s needs and interests are protected for years to come.