No estate plan is perfect for everyone. For it to work effectively, an estate plan must reflect the assets and potential heirs, as well as the values and goals of the person it was created for. This is never truer than when an estate plan is created for the parent of a young child.
We know it’s not an easy thing to think about, but it’s an important one: When children are involved, the estate plan must focus on providing for them in case of an unforeseen event that claims the life of one or both parents. Here are some of the major items parents of young children should consider when creating an estate plan.
Naming a Guardian
If something happens to one parent, the other parent can usually take care of the children. But this is not always the case. What if one parent is not involved in the child’s life? What if he or she is physically or mentally unable to provide care? What if something happens to both of you? In those cases, it is important to designate a guardian who can care for your children.
Choosing a guardian is a major decision. Take the time to choose the right person, talk with them about your proposed choice, and make sure they accept the responsibility. You’ll want to consider their beliefs, ability to provide care and their financial situation. Make sure the guardian knows your plans and understands the commitment they are making.
Naming Someone to Administer the Estate
You’ll also want to name a capable executor or estate administrator who can handle your financial affairs and protect your children’s interests. He or she will need to do things like locating, valuing and distributing assets; paying bills; and talking with financial or legal advisors. It’s a big job; as with a guardian, choose someone carefully.
Creating a Trust
When you create an estate plan, your lawyer may talk with you about creating a trust that will hold assets passing to a child. The trust can be set up in many different ways. Generally, you can name a trustee who will manage and distribute trust funds for the benefit of your child.
You can also designate the age at which the trust ends and the money disburses to the child. This does not have to happen at age 18. In fact, many people choose to have money distributed to their children at a much later time—like upon graduation from college or at another time well into adulthood.
Planning for Serious Illness or Disability
You might be thinking of your estate plan in terms of what happens if you pass away, but a complete estate plan accounts for more than that. Estate planning can be a valuable tool to help protect your children if you become seriously ill or disabled. As part of your complete estate plan, your attorney may also help you consider a power of attorney, health care directive, and a review of your insurance needs.
The hope is that you will never need to use any of these items. But at least you will gain peace of mind knowing that your children are protected with an estate plan that has been tailored to your needs as a parent.