Many young families put off estate planning. If asked, they may say they are too young, healthy or can’t afford it. Some have trouble just thinking about what could happen if they should die while their minor children and spouse are depending on them.
But even a healthy, young adult can be taken suddenly by an accident or illness, and those with young families need estate planning precisely because others are depending on them. Of course, the typical young adult is not expecting to die while his or her family is young, but clients who plan for the possibility are being prudent and responsible … and showing their familes how much they care.
A good estate plan for a young family will include naming someone to administer the estate (a trustee or executor), naming a guardian to care for minor children, providing instructions for the distribution of assets, and naming someone to manage the inheritance for the children until they become adults. It will also include a review of insurance needs and planning for disability.
Naming an executor or trustee for the estate. This person will be responsible for handling the client’s final financial affairs — locating and valuing assets, locating and paying bills, distributing assets, hiring an attorney and other advisors — so it should be someone who is trustworthy, willing, able, knows the client and will carry out his or her wishes.
Naming a guardian for minor children. If something happens to one parent, the other parent will continue to raise the children (unless he or she is physically or emotionally unable to do so). But who will raise them if something happens to both parents? This is often a difficult decision for parents, but it is very important. If parents have not named a guardian, the court will have to appoint someone without knowing their wishes, their children or their family members.
See also: The Ins and Outs of Trusts
Providing instructions for distribution of assets. Most married couples want their assets to go to the surviving spouse if one of them dies. If both parents die and the children are young, they want their assets to be used to care for their children. Some assets will transfer automatically to the surviving spouse by beneficiary designations and how title is held. However, an estate plan is still needed in the event this spouse becomes disabled or dies, so the assets can be used to provide for the children.
Naming someone to manage the children’s inheritance. Unless clients include this in their estate planning, the court will appoint someone to oversee their children’s inheritance. This will likely be a friend of the judge and a stranger to the family. It will cost money, which will be paid from the inheritance. Also, the children will receive their inheritance (in equal shares) when they reach legal age, usually age 18. Most parents prefer that their children inherit when they are older and to keep the money in one “pot,” so it can be used to care for the children’s different needs. Establishing a trust for the children’s inheritance lets your client accomplish these goals and select someone he or she knows and trusts to manage it.
Reviewing insurance needs. Part of the estate planning process is to review the amount of life insurance on both parents. Income earned by one or both parents would need to be replaced. Also, one or more people would probably be needed to take over the responsibilities of a stay-at-home parent. Additional coverage may be needed to provide for the children until they are grown, even more if your client wants to pay for the children’s college.