Estate Planning Milestones for Parents

There’s no question that having kids changes your life. Naturally, your priorities and responsibilities shift, and this should also be reflected in your estate plan. Here are a few checkpoints
throughout your child’s life when you should recalibrate your estate plan, ensuring that, no matter what, your child is provided for if something were to happen to you.

Newborn

In the midst of adjusting to parenthood and sleepless nights, crafting an estate plan can easily slip down to the bottom of your to-do list.  Without a doubt, it can be a daunting process.  Many new parents would prefer to avoid thinking about such a grim topic during one of the most exciting times of their lives.  Regardless of how much you’d rather push the matter to the back of your mind, this significant development within your family requires that you update your estate plan (or create one if you don’t already have one in place).

When welcoming a new member of your family into the world, there are two important things to address within your estate plan: the care and custody of that child and the management and distribution of the assets you will leave to them.

For most new parents, writing or revising their will is less about leaving their assets than it is about naming a guardian for their child.  This guardian will assume all responsibility for your child if something happens to you.   They will decide where your child will live and attend school, what type of health care your child will receive, and make other day-to-day decisions regarding your child’s upbringing.  If you don’t name a guardian and a situation arises where your child will need one, the Court will choose the guardian. Because the Court isn’t familiar with your family or your child individually, the person they choose may not be in line with your preferences.

In addition to selecting a guardian, you may also want to set up a trust for your child to preserve your assets for your child when they get older.  This trust could include assets such as your home, your life insurance, your retirement accounts, your savings and investments.  These assets and funds can then be used your child’s education, living expenses, and health care expenses.

Age 5

As your child heads off to kindergarten, you will most likely begin to plan for the upcoming years of schooling and how to lay the best foundation for their future.  You may begin to grapple with
the eventual costs of their education.  When you sit down to plan for their college fund or strategize how to pay for their private education, consider including these plans in your estate plan as well.

There are a few options for how to plan for your child’s education, many parents opt to utilize a 529 plan.   Also known as “qualified tuition plans,” 529 plans allow investment earnings to grow sheltered from federal income taxes.  Withdrawals used to pay for qualified higher education expenses are tax-free.

Age 13

As kids grow up, they organically develop their own relationships with family members and loved ones.  Certain relationships may grow stronger or weaker over time.  Due to these shifting dynamics, it is wise to reevaluate who is named as your child’s guardian when they enter their teenage years.  Does your child have a healthy relationship with the person you’ve designated as their guardian?

Also, consider the general health and circumstances of the guardian you had previously selected.  Have they experienced health complications that might prevent them from performing this role?  Have they moved to another state that would mean uprooting your child if they needed to fulfill these duties as the guardian?  Have they undergone any financial hardships?  As a parent, you know that raising a child is expensive, so consider whether or not this role would strain your chosen guardian’s financial resources.  (Find out more about guardianships)

Age 17

All Wills where a minor will inherit should include a trust to hold and manage the assets until the child reaches the age of majority.  However, when your child approaches adulthood, you may want to reevaluate if you want to give them access to these assets at 18 or later to give them time to mature.   Regardless of how mature your son or daughter may be, they may still fall victim to the bad judgment of others.   There are many potential issues that can put your child’s inheritance at risk, but some of these hypotheticals can be addressed if your plan is updated to take your child’s maturity into account as he or she ages.   (Read more about trusts)

Age 18

Once your child turns 18, he or she is considered an adult.  This means that your son or daughter is legally in charge of their own life now.  If a medical emergency arises, health care providers are no longer authorized to discuss or disclose the details of their condition or care with you.  Nor are you authorized to make medical or financial decisions on their behalf – even if you pay their tuition, cover their health insurance and claim them as dependents on your tax returns. Ensure that you can assist your child with decision-making if they suffer a serious illness or disability by having them sign a Medical Power of Attorney and a Durable Power of Attorney before they leave home for college or take the next step in life.

Age 25

Your estate plan should be revisited once your child marries or starts to have kids of their own.   Consider if you would like to include your grandchildren in your plan, and if you would, when they should be added.

Once an estate plan is completed, many people will put it in a safe deposit box and then forget about it.  I encourage you to avoid this “checked-the-box” mentality.  Estate planning isn’t a one-time thing, it’s a lifetime process. Your estate plan should evolve as your life evolves.

 

Planning for a Possible Future Incapacity

We all hope to live a long fulfilled life.  That picture usually includes living in the home of our choice and making all of our decisions.  However with modern medicine prolonging life spans, more and more people are finding themselves needing care at the end of their life.

This care can be as simple as someone coming in to clean the house, help with household chores and fix a few meals.  The other extreme is the need for skilled nursing and living in a nursing home with 24 hour care.  There are many levels of care between the two.

Who is responsible for this care?  Who decides what will be done and when?  From a legal standpoint, as long as you can make decisions for yourself you decide.  Furthermore, you can decide who will step in when you are no longer able to make the decisions for yourself.

The state has guidelines that include a priority list for who should make your decisions.  Your spouse is first followed by your next of kin.  If you have children, they have equal priority because their relationship to you is the same.  However, there are two ways you can control who is considered for your care.

First, a durable (financial) power of attorney and a medical power of attorney will allow someone to step in immediately to care for you temporarily or permanently.  Second, a declaration of guardian in advance of need will provide the court with your priority order.  This declaration is used if a guardianship proceeding becomes necessary.  A guardianship proceeding would appoint someone to care for you and remove some or all of your legal rights.

This declaration allows you to specify who you want to be appointed your guardian if you become incapacitated and need one.  It also allows you to specify individuals who should not be considered.  You can have control of your future with these simple documents.

What Can Happen to Children if Their Parents Die Without a Properly Drafted Will?

Many of us embrace the do it yourself (DIY) lifestyle.  Why pay someone to do something you are fully capable of doing yourself?  In many cases this is wise money management but it can be a disaster in the making.  Consider the plight of Jane’s children.

Jane received a medical diagnosis that ensured her premature death.  She left behind four children (4, 8, 12, 15), a life insurance policy and a modest estate.  She desperately wanted to protect her children so she bought a book and prepared a will.

The book allowed her to create a legal will with the proper witnesses.  She appointed her sister as the executor and left her estate and life insurance policy to be equally distributed to her four children.  The book didn’t explain or she didn’t understand that children under 18 can’t own or manage property.  So the life insurance proceeds which normally pay directly to the beneficiary will be subject to a probate proceeding.

A court appointed guardianship will be required to manage the funds left to the children and the associated fees will reduce the money available for their care.  This will also delay availability of the funds for the care of the children.  If she had created a trust for the care of her children, the life insurance would have been paid immediately to the trustee and would be available for their care.

Jane did not appoint a guardian for her children.  The father of the older three has been out of the picture for several years.  The youngest was the result of a brief affair but her father has been an occasional visitor in her life.  Now the children may be separated because the biological fathers will have first priority in the custody consideration.  Even if the fathers don’t step up she has not left clear direction for who she would want to raise them.  Should it be her sister?  Her parents? The children’s paternal grandparents? The possibilities are endless and will now be analyzed by a judge instead of Jane.  Appointing a guardian would have provided an easy avenue for the children to stay together if their respective fathers had agreed.

Each of us leaves a unique signature on the world when we pass and your will should be tailored to the needs of the situation you will leave behind.  A consultation with an attorney is a simple pain free process that will allow you to prepare a will that addresses your needs and provides clear direction for those you leave behind.