If the first time you think about needing a will is when you take your first vacation without kids, then you need to get started, soon. With the two of you on a plan to a remote island destination, what would happen if you never returned? Who would raise your children, be in charge of their finances, and make sure they grow up according to your aspirations?
The second part of preparing for your family’s well being is to understand that an estate plan requires ongoing care and maintenance, just like your health or your home. It needs to be updated from time to time, to reflect changes in your life and the tax laws.
Despite the importance of estate planning, less than half of all Americans have a will, according to a 2017 caring.com study. Of parents of children under age 18, only about a third of Americans have a will. That means if anything should happen to the parents, the children and their future are left to the laws of the state to determine.
The court must follow certain laws in determining who will raise the children when the parents are both gone, if there is no will. This can lead to terrible situations. What if your closest living relative is someone you wouldn’t want taking care of your goldfish, never mind your children? If you have a special needs child and the court decides that your child needs to move 1,000 miles away to live with a blood relative they’ve never met, rather than staying in a familiar setting with the services they know and are accustomed?
Since we don’t know when we will die, but we do want to take care of our families, the thing to do is to have a will and an estate plan created with a trusted estate planning attorney. Here are the documents you’ll need:
A will, the legal document that determines who should receive your money, your possessions and who becomes a guardian to minor children.
Note that every state has its estate planning laws, so you’ll want to work with a local attorney who knows your state’s laws. The risk of doing it on your own is that you won’t know if the will is valid. Your surviving family members will be the ones to discover. That’s not a good scenario.
Plans for incapacity include power of attorney and a living will.
Few understand the importance of a living will, also known as a health care directive, until they have personal experience. When rushing an elderly family member the ER and the first responders ask if there is an Advance Care Directive, or a Living Will, or a Do Not Resuscitate document, the answer is often “I don’t know.”
These convey wishes to first responders and physicians about care if the person cannot communicate. Having the documents prepared and on-hand allows making healthcare decisions without a court order.
A power of attorney is a document naming a person, known as an “agent” to make legal and financial decisions on your behalf. That may include paying the household bills and ensuring proper management of the family’s finances.
What about trusts? A trust is a legal entity that holds any property you want to leave to beneficiaries. Trusts do not pass through probate, so they can make the transfer of assets take place faster. Trusts allow you to set up rules for distributing trust assets. You might create a trust for a child to pay for college education only, and name a trustee who will be in charge of the funds. A trust could also stagger the distribution of money, so an 18-year-old doesn’t have access to a lot of money all at once, but during their adulthood.
There are many different trusts, and some can be complicated. Trusts can be for tax planning and to encourage achieving particular goals (i.e., sobriety, employment or completion of a college degree).
Before setting up a trust, talk with your estate planning attorney about your goals. That will play a part in determining what kind of trust is needed.
Remember to review beneficiary designations on any assets that allow you to name a beneficiary. This is where a lot of estate planning goes off the rails. The will does not override a beneficiary designation. If you opened an IRA at your first job and designated a parent because you were not married at the time and now the parent is deceased, you may have an estate planning issue. Update your beneficiary designations on all of your accounts, and check them every few years.
Talk to your family members. Our society does not like to discuss death, but your family will benefit from knowing your plans. If your estate plan includes trustees and power of attorney, those people need to know what you are asking of them. You’ll need to know if they are prepared to take on the responsibilities.
Finally, utilizing the services of an estate planning attorney will better protect your family. Mistakes can be costly, stressful and lead to family disagreements that can turn toxic. An experienced estate planning attorney will do far more than only prepare documents. They will analyze your unique situation to address any tax issues, explore how to manage your family’s dynamics, help you align assets with your wishes, you properly funded your trusts, and, your assets are correctly titled and address other details that go into a successful estate plan.
Reference: USA TODAY (April 1, 2019) “Estate planning: 6 steps to ensure your family is financially ready for when you die”