No matter if you’re a new parent or a parent with a huge family, you know there’s not many things you wouldn’t do to ensure your kids are taken care of. You certainly kid-proof your home, equipped your car with a car seat, and invested a lot of money in their education, but what about a contingency plan in case something happens to you? Do you know where your money will go? Do you know who will take care of your kids? All of these important things can be handled with a good estate plan. Here are some tips you need to keep in mind.
Create a trust
This is a powerful tool that can help you pass down your possessions in a responsible way that will encourage smart use of your assets. Trust protects your estate from probate and various taxes. In order to ensure better safety of your possessions, you can create a revocable living trust which can be easily changed before the grantor dies (usually suitable for parents of young children). But, in some cases, you should better go with an irrevocable trust that can be changed only under extreme circumstances.
Creating a trust has other benefits too, such as placing limitations on when and how your kids can receive your money and possessions. Many parents are scared that their kids will get money and quickly spend it in a reckless manner, so if that’s your concern, you can create space out of trust payments. In that case, your kids will receive payouts when they are 25, 30 and 35.
Add a secondary beneficiary
This is an unlikely scenario, but if both you and your partner pass away at the same time, it’s good to have a secondary beneficiary in your child. This title puts them next in line for receiving your savings, life insurance, and other assets. Listing a tertiary beneficiary is also possible.
Make a Will and add a guardian designation
One of the primary roles of a will is to establish who will take care of your kids if you die. What will happen to your most precious loved ones in case both you and your spouse get incapacitated or pass away? Creating a will and adding a guardian designation will ensure your child is well-taken care of. Knowing exactly how your kid will be cared for can give you great peace of mind. To ensure everyone is on the same page when it comes to your decisions, you can hire someone to organize a reading of will family conference where everyone will receive an explanation of the terms of the will and also discuss plans or strategies to progress the estate administration. This meeting will resolve any misunderstandings and ensure that beneficiaries are aware of the avenues available to them.
Create an advance healthcare directive
Advance healthcare directive AKA a living will might not be related to your children at the first glance, but it can greatly make things easier for them in case you get incapacitated. In the case of incapacitation, your healthcare directive will impact how your kids interact with you and where and how much care you want to receive.
Your living Will states how you want to be cared for in case of injury or illness and you can specify whether you want to be resuscitated or held alive artificially. Also, this will authorize people to make medical decisions in your name if you can’t make them yourself.
Account for children from previous marriages
If you were married or in a serious relationship with a person before your current partner, you might have already drafted some child-related estate planning documents. But if you have a new kid with your current spouse, you must adjust your plan accordingly and ensure your documents are relevant based on your living situation at the moment.
Many people with blended families prefer to create separate trusts that will ensure kids from previous marriages also receive necessary funds. Some estate plans include a combination of joint and separate trusts (“his, hers and ours” estate plans).
As soon as you have some changes in your family (new marriage or the birth of a child) make sure to update your estate plan so that everyone is included in the way that you want. This will ensure you can lead a care-free life knowing your family is safe and taken care of