A child brings lots of new tasks for the new parents: clothing, eating, sleeping, staying healthy to name a few. Chances are, family estate planning is far down on your current priority list. Moreover, you might not even know about the concept at all. But do not worry, Brinzensky Law Team is ready to answer the question “What is estate planning?” and give you some tips to do it right.
In a nutshell, when planning your estate, you develop a comprehensive action plan on what would happen to your assets should you die or become incapacitated. Besides that, the process also involves the assignment of a person who would monitor the implementation of your plan. Here is an essential estate planning checklist for your consideration.
Decide on the people in charge
Whenever you are not present, there should be a guardian and a trustee who will legally replace you for the child.
A guardian is a person who will control your child’s life, namely the choice of a school, purchase of clothes, etc. Do not forget to discuss your legal decision of appointing someone as a guardian because a person you choose needs to fully understand the commitment. Should your decision be made not in the child’s best interest, the court may legally change the guardian.
A trustee is a person who will pay the child’s bills, file any income tax returns due, and ultimately will return the rest of the money to the child. While a guardian is an obligatory figure, a trustee is an optional one. Yet, the court has very limited authority in terms of changing the trustee. You can choose the same person to be a guardian and a trustee for your child.
Develop post-mortem documents
After a guardian and a trustee are selected, consider creating a will and a trust document for the kid (you can learn more about types of trusts for estate planning in our blog). Sometimes, the cost of both might be too high; in such cases, consider the development of a single “testamentary trust” as a part of your last will can also be effective if funded properly.
Why is this important? One: minors cannot own any property, therefore ensure that you work with an estate planning attorney to legally transfer your property rights to the child. Second: if you fail to do so, then legally your property will be divided between the spouse and the child or even be handed over to the government. So the development of a will or a testamentary trust is the only way to ensure that your child receives the required financial support even in case of an accident with you.
Analyze your life insurance
Life insurance is a must-have for young parents. However, the calculation of how much you need might be a tough call. As a rule, you would not have enough budget for the best insurance available, so focus on how much you actually need right now and for how long you will need it (to decide on finite vs. permanent insurance). And keep in mind that at least one of the parents need to have good life insurance since otherwise, the child’s loss of both parents can become a difficult event to deal with.
Revise account ownership and beneficiaries
And to finalize your estate planning strategy focus on titling your existing accounts and selecting the right beneficiaries to the investment accounts and life insurance. Again, remember that a minor cannot be a primary or contingent beneficiary of any life insurance policies or investment accounts, so focus on giving this role to your spouse or partner and/or one of your parents.