Estate plans change over time. Young, single individuals generally need a basic plan to explain how assets will be distributed while older, married couples may have more complex plans including a will, trusts, healthcare directives and powers of attorney. Regardless of a person’s stage in life, it is important to have an estate plan.
One of the most important times to revisit or put together an estate plan is after the birth of a child. At this time, the plan should outline who will take care of the children and how finances will be handled.
Estate planning for young parents
When revisiting or developing an estate plan, it is wise for young parents to include the following:
- Name guardians
- Establish a will and/or trusts
- Set up life insurance policies
Guardians are responsible for raising the children. This can include ensuring the child’s physical well-being and managing any assets that may belong to the child. Determining who will take on this role can be the most difficult decision parents make.
One option to help ease the stress of the decision is to name different individuals with different strengths for specific tasks. For example, a couple may name one set of grandparents who live in the same neighborhood responsible for the upbringing of the children while another grandparent with a background in finances may be put in charge of managing the child’s assets.
It is also important to keep in mind that this delegation can be changed. If, for example, the guardians initially named are grandparents, parents could change the designation to trusted friends or siblings as the grandparents age.
In addition to determining who will raise the children, it is also important to review how finances will be managed. Assets are generally controlled through the establishment of a will and, in some cases, trusts. A trust can be a valuable tool, allowing parents to funnel assets into the fund while a trustee monitors how much is given to the children. Trusts can be designed to pay for the health, education and welfare of the beneficiaries and can help shield the money from creditors.
One way to help fund a trust is through use of life insurance policies. These policies are designed to provide cash to the listed beneficiaries in the event of the policyholder’s death. There are many types of life insurance policies to choose from, but the term policy generally works well for young parents. This policy is a relatively inexpensive option and can range from 5 to 20 years in length.
Determining which tools are most effective for your estate plan can be difficult. As a result, it is wise to contact an experienced estate planning lawyer to help design a plan that best suits your wishes.
