Newly wedded couples don’t always see enough reasons to create an estate plan. Even after having their first child, they mostly are still in the early stages of their financial lives, and they do not yet have so many assets to their name. After all, they don’t have up to $11 million dollars to be worried about estate tax. There is a great deal of life ahead, and they can worry about estate planning when they have a larger estate (so they say).
But estate planning doesn’t always have to do with tax and financial planning. It’s more about securing the well-being of those who you would leave behind should something happen to you. If you have minors, they cannot inherit your property by law until they attain the legal age of 18. But in most cases, parents who have minors create wills, leaving assets to the other spouse with hopes they will take care of their children together.
But, God forbid, what happens when both parents lost their lives in a car accident at the same time? Who does their property go to? Who will see to it that their children are well cared for?
No matter what stage you are in life, strategic estate planning for your minors is crucial.
Checklist for estate planning for minors
1. Name a guardian in your will
If you have minors, the first thing to do is to write your will and name a guardian for your children. You should put aside those emotions telling you that you’re being pessimistic. You are not. You are only being cautious. If peradventure you pass away or become incapacitated together with your spouse, your guardian will step in to handle your duties for the child. They will use the assets you left for the child’s benefit according to your instructions in the will. In choosing a guardian, you should consider their proximity to your home, beliefs, parental competence, lifestyle, etc. You do not want to put your child in the wrong hands.
Also, you should seek your spouse’s consent as the case may be, as well as the guardian’s. It wouldn’t be nice pulling someone into a role they’re not prepared for.
2. Create a minor’s trust
With a will, your appointed guardian will manage the assets until the child turns 18. Then, the entire estate will be transferred into their possession.
It is true that you don’t know how financially responsible your child will turn out to be. They are still underage, so you can’t trust them with your entire estate when they turn 18. It is advisable to create a minor’s trust within the will. With this, your trustee will continue to manage, invest, and distribute the assets according to your trust’s instructions even after the child exceeds 18. This would avoid squandering by a child who just struck a pot of gold.
In the trust, you can lay down instructions on how the money is to be used for the child’s education, healthcare, and investments till a certain time. It could be until they get married or turn 35 as you deem fit. It is a long-term security over your child. You continue to be there with them even when you’re no more.
3. Get powers of attorney
In the event you become incapacitated (unable to make decisions) you can authorize someone else to make decisions for you. You can make that happen by creating a power of attorney now. The financial power of attorney authorizes your agent to make financial decisions on your behalf, while the medical power of attorney grants them powers over your healthcare.
The reason why you need the financial power of attorney is that your spouse has no legal right to access your account. They would need a court order to be able to get money from your account to foot your bills. Should you fall into a life and death situation, you want things to be fast.
4. Create a living will
In your living will, you express your wishes concerning end-of-life situations. During end-of-life, you can’t make decisions because you’re unconscious. But you can make those wishes now, say, you do not want to be kept on life support, or you don’t want any extreme measures like CPR.
5. Create a Third-Party Funded Special Needs Trust if you have a child with special needs
If you have an incapacitated child, then they would need extra help even after reaching adulthood. By creating a special needs trust for them, you hold assets to be managed by the trustee for your child’s benefit.
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