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Financial Planning > Trusts and Estates > Estate Planning

No estate plan? 3 reasons your clients' children are at risk

By Erik Hartstrom

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As parents, we all have hopes and dreams for our children. We picture the milestones of graduation, marriage, career and everything in between. And we picture ourselves beside them, supporting them, guiding them, challenging them, and just being there for them.

But if the unthinkable should happen, would your clients’ children face the future with a carefully prepared plan, or without one?  Here are three ways your parent clients are putting their children at risk by not having an estate plan in place.

See also: 5 estate planning black holes

estate plan judge

1.       The court will choose the children’s guardian.

Choosing a potential guardian for your own children is emotionally challenging. Parents must consider the specific needs of the children, the family dynamics … and the list goes on. It is a tough decision to make. But if parents don’t make it in advance, a judge will. Will that judge know and understand all of the children’s needs like a parent does? By completing a will, parents make the choice.

Locked up money

2.       The court will manage the children’s money.

Life insurance and retirement benefits, along with the rest of your client’s estate, can’t go directly to his or her children. In California and in most states, the executor will have to put that money into a special account that requires court permission to access. The court will not award the estate to minor children until they turn 18. Even the guardian will not be able to access any of that money without the court’s approval. However, with a trust, the trustee is completely in charge and does not have to ask permission from the court when choosing how to best use the estate to support the children.

See also: How to protect life insurance beneficiaries from a windfall

court costs

3.       Figuring it out in court takes precious time and money.

While the court can act “quickly” in emergency situations, your client’s family will likely have to spend extra money for legal assistance to get the appropriate paperwork to the court and then wait for the court to approve their request. Realistically, that process could take weeks or even months. In contrast, a successor trustee would step in immediately, removing uncertainty and providing stability during this crucial time. By having a plan in place, your clients can remove some of the uncertainty their families would face. Without a plan in place, the family and the court will have to scramble to appoint someone to be in charge of the money and the children.

Preparing an estate plan is easier than most people think. And the cost of having a professionally prepared estate plan pales in comparison to the consequences of failing to plan. 

For more on estate planning, see:

Budget proposal targets estate planning tools

10 estate planning tax facts you need to know

Estate planning in a post-fiscal cliff world