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Many new or young families put off estate planning. When asked, they may say they are too young, healthy or can’t afford it. Some have trouble just thinking about what could happen if they should die while their minor children and spouse are depending on them. Even a healthy, young adult can be taken suddenly by an accident or illness, and those with young families need estate planning precisely because others are depending on them. You are not expecting to die while your family is young, but planning for the possibility is being prudent and responsible, and it shows your family how much you care.
A good estate plan for a young family will include naming someone to administer the estate, naming a guardian to care for minor children, providing instructions for the distribution of your assets, and naming someone to manage the children's inheritance until they become adults. An excellent estate plan should also include reviewing your insurance needs and planning for disabilities of one or both spouses and the children.
Naming an Executor or Trustee for Your Estate
This person will be responsible for handling your final financial affairs—locating and valuing assets, locating and paying bills, distributing assets, hiring an attorney and other advisors—so it must be someone who is trustworthy, willing and able to serve; who knows you, and who will carry out your wishes.
Naming a Guardian for Minor Children
If something happens to one parent, the other parent will continue to raise the children (unless he or she is physically or emotionally unable to do so). But who will raise them if something happens to both of you? This is often a difficult decision for parents, but it is very important because if you have not named a guardian, the court MUST appoint someone--and they will do so without knowing your wishes, or anything about your children, or anything about your family members.
Providing Instructions for Distribution of Your Assets
The majority of married couples want their assets to go to the surviving spouse if one of them dies. If both parents die and the children are young, they logically want their assets to be used to care for their children. In Virginia, some assets will transfer automatically to the surviving spouse by beneficiary designations and how title is held. However, an estate plan is still needed in the event this spouse becomes disabled or dies, so that assets can be used to provide for the kids.
Naming Someone to Manage Your Children’s Inheritance
Unless you include this in your estate planning, the court will appoint someone to oversee your children’s inheritance. This will likely be a friend of the judge and a stranger to your family. It will cost money, which will be paid from the inheritance. Also, the children will receive their inheritance (in equal shares) when they reach the legal age of majority, usually age 18. Most parents prefer that their children inherit when they are older and to keep the money in one “pot” so it can be used to care for the children’s different needs. Establishing a trust for your children’s inheritance lets you accomplish these goals and select someone you know/trust to manage it.
Reviewing Insurance Needs
Part of the estate planning process is to review the amount of all applicable insurance policies owned by both parents. Income earned by one or both parents would need to be replaced in the event of death or disability; also, one or more people would probably be needed to take over the responsibilities of a stay-at-home parent. Additional coverage may be needed to provide for your children until they are grown; even more if you want to pay for college.
Planning for Disability
There is the possibility that one or both parents could become disabled due to injury, illness or even a random act of violence. This should be planned for, as well. Both parents need medical powers of attorney that give someone else legal authority to make health care decisions for you if you are unable to do so. You would probably name your spouse to do this, but one or two others should be named in case your spouse is also unable to act. HIPPA authorizations will give your doctors permission to discuss your medical situation with others (parents, siblings and close friends). Disability income insurance should also be considered because life insurance does not pay at disability.
Putting Your Plan in Place
Estate planning will require you to think about family relationships--some decisions will be difficult. That is why an estate planning attorney and counselor at law will be able to help you through the process, provide valuable guidance, and make sure your plan will do what you want when it is needed. If finances are tight, as they usually are for young families, start with the most essential legal documents and insurances, then update and upgrade your plan as your financial situation improves. The most important thing is to not put this off. Call me today!
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