Tips in Estate Planning for New Parents: Don’t Get Overwhelmed!
If you are a new parent or expecting your first child, estate planning may be the furthest thing from your mind. However, becoming a parent is when estate planning becomes essential.
As a parent (or grandparent!), there are a thousand things to worry about. Having children in your life creates responsibility, and one of those responsibilities is ensuring that you have provided for their care if you are ever unable to provide it yourself. Please consider taking just a few minutes to read our top tips on what every parent needs to know about estate planning.
Tip #1: A Will is More than a Means of Passing Down Possessions
The first thing that many people think of when they hear the words “estate planning” is a will - especially when it comes to children. Many of us conjure images of movies where the will is read out and the children gather around to hear what they “get.” In reality, wills can provide a lot more than a simple disseminating of your worldly possessions, and there are many other ways to make sure your wishes are carried out.
In fact, while most people should have a written will, it should act more as a catch-all for the assets that cannot be transferred in another way. When you allocate assets in a will, they become subject to your state’s probate process. This means that your family will have to go before a probate court and follow a process that ensures that your will is fair and authentic. This process can be time-consuming and costly. Most importantly, it is public and subject to challenges because your will is entered into the public record.
It is not a bad thing, however, to have a written will. While many assets, such as bank accounts, insurance policies, and investments can often be transferred to heirs simply by naming a beneficiary, it is best to have a written document that catches any assets that fall through the cracks: either because they cannot be transferred outside of probate or because beneficiaries have not been named or recently updated.
When drafting a will, take into careful consideration who you will name as the executor of your estate. This is the person who will be responsible for carrying out the decisions laid out in your will and distributing assets in accordance with your wishes.
Tip #2: The Most Important Function of a Will is Guardianship Nominations
If you have minor children, appointing a guardian is the most important function of a will. If you become unable to care for your children while they are under the age of 18, either because of premature death or incapacity due to illness or injury, you must choose a trusted adult who will be able to step in and care for your children. If you do not have a will or do not appoint a guardian in the document, the court will appoint a guardian for you. The court may choose someone that you would not prefer, and a court appointment may result in disputes or even legal battles among family members.
Tip #3: Take Plenty of Time to Consider Your Guardianship Options
Choosing a guardian is a deeply personal decision and one that should be made after careful consideration. Appointing a guardian for your minor children can be different than choosing a conservator or trustee, who will manage a minor’s inheritance of property and assets until he or she reaches adulthood. This will be discussed in the next tip.
There are a number of factors you will want to consider when choosing a guardian for your minor children:
Who would the child choose? If your child is old enough to give input, you may wish to include him or her in the decision.
Is the person willing and able to be a guardian of minor children? It will be essential to determine whether a potential guardian has the financial means to take care of your minor children. You will need to discuss this with the potential guardian and ask, if they are financially able, would they be willing to care for your children?
Does the person share your religious and moral values? If specific religious beliefs and/or values are important to you, make sure that the potential guardian shares in your philosophies.
Is the person married or unmarried? Do they have children of their own? Where do they live? Can their home accommodate children? It is important to think through all of these questions. There are no right answers to who will be the best guardian for your children, but it is important to consider all of the implications of this decision.
The guardianship provision in your will should appoint a guardian and a successor guardian. It is essential to appoint at least two individuals in the case that the first guardian is unable to unwilling to take on custody of your children at the time. It is not recommended to appoint a married couple together as guardians because of the possibility of divorce.
When you meet with an attorney, be prepared to talk through all of these issues before you make a decision about who you would like to appoint as a potential guardian. He or she can inform you of any statutory limitations to appointing a guardian in your state. You can also work with an attorney to draft a document providing specific instructions for raising your children.
Tip #4: Minor Children Cannot Inherit, So You Can Provide for Their Long-Term Wellbeing Using a Revocable Living Trust
In the Commonwealth of Virginia, minor children cannot inherit money or property outright until they reach adulthood at the age of 18. If you die while your children are still minors, it will be important to create a method that allows your children and their guardian to receive financial support from your estate. Creating a revocable living trust is a great way to ensure that your children will be provided for, even if they are still minors. Without a trust, your assets can still be distributed for your children’s benefit, but a conservator (appointed by the court or designated in your will) is required to report regularly to the court and all expenditures are subject to extensive oversight.
A revocable living trust is a way to allocate assets for a beneficiary while you are still alive. Because the trust is revocable, it can also be undone at any time while you are alive. When you create a revocable living trust, you will appoint yourself trustee so that you remain in control of your assets. When you become incapacitated or die, your trust will become irrevocable, and control of the assets will pass to the successor trustee. You can appoint any trusted individual to be the successor trustee (this can be the same person as your appointed guardian or another person). This trustee will be responsible for ensuring that the guidelines of the trust are carried out. These may be distributions to the guardian to provide for the health, daily needs, education, and child care of minor children, or they may provide that the trustee distribute the assets to your children as soon as they reach maturity. These guidelines can be tailored specifically to your family and your wishes.
The successor trustee should be someone trustworthy and reliable. Take into consideration the fact that the trustee and the guardian will need to work closely together to ensure that the child is cared for and that the guardian has access to funds needed to provide for the child’s care.
If you have adult children and guardianship is not an issue, a revocable living trust is still a great option. Again, it allows you to retain control of your assets until you are unable to do so, and then the funds can be made available to your adult children in accordance with your instructions. Assets distributed through a trust are also not subject to probate, so you will be able to pass assets to your beneficiaries without the delay, public involvement, or cost of going to probate court.
Tip #5: There is More to an Estate Plan than Wills and Trusts
Beyond the transfer of assets and guardianship for your minor children, your estate plan can also provide guidance for how you want to handle unexpected illness or injury. A Power of Attorney is a document that specifies, should you become incapacitated, who will be able to manage your assets. Keep your children in mind and choose someone you trust and who you know will act in your children’s best interests.
A Health Care Directive is a planning document that names the person who will be legally empowered to make medical decisions on your behalf should you become incapacitated. A Living Will (also called an Advance Directive) will lay out your preferences for end-of-life care. It will allow you to specify how you would like matters such as resuscitation and pain medication to be handled in the case that you are unable to state your preferences.
Tip #6: If You Already Have an Estate Plan, You Will Need to Revisit it Now that You are a Parent
If you worked with an attorney before becoming a parent or grandparent, you may want to revisit these documents with children in mind. You and your attorney can discuss how these decisions can impact your children.
Tip #7: Get an Experienced and Compassionate Professional on Your Team
Having children is stressful, and one way to ease some of these worries is to ensure that your children and heirs will be taken care of when you are no longer able to provide for them. An estate planning attorney can work with you to create an estate plan that suits your specific needs. At Wakefield Law, PLLC, our compassionate attorneys are here to help you create a plan that is tailored to your family and your life. If you are ready to get started, give us a call at (703) 771-9740.