Most of the young families don’t think of estate planning due to various reasons like some think that they are way too young, healthy while for some it is an expensive process. Also, some people don’t want to think of their death while being so young and having a family. However, you can never know what will happen to you the very next moment. Hence, if you have a young family then you surely need estate planning as you have your loved ones who are dependent on you. It is obvious that no one wants to die but planning ahead of time for the unexpected shows your smartness, responsibility, and concern towards your family.
Estate Planning For Young Families-
There are two main important objectives of estate planning. Firstly, to take care of your assets be it minimal or significant, and secondly to take care of yourself when you become incapacitated due to illness or an accident. However, when kids come into the picture, there comes a third objective that who will take responsibility of your children when you will no longer be able to do so.
Below are a few points that estate planning can accomplish irrespective of the amount of wealth you own:
1. Assigning an executor or trustee for your estate: After your demise, an executor or trustee is the person who is responsible for managing your final financial matters like tracking down and valuing your assets, tracking down your bills and their payment, distributing your assets according to your wishes, etc. Hence, you should choose a person who is trustworthy, willing, and capable to perform the responsibility.
2. Naming a guardian for the minors: If one of the parents dies, then the surviving parent gets the full custody and will raise the children. However, if the surviving parent is physically or emotionally unfit, or he/she dies as well, then in such kind of cases it is very important that you must appoint a guardian for your children. If you will not do so then the court will appoint one irrespective of what your wishes were and how the guardian is with the children. You must take care that whoever you assign the guardian must be well-known to your kids, trustworthy, responsible, capable and willing to perform the job on your behalf until the children become adults.
3. Assigning a trustee or conservator to manage your children’s heir: Apart from appointing a guardian, you must appoint a conservator or trustee to manage your assets until the children become adults. There are two ways to do that viz. a living trust and a custodial account.
With a living trust, you put your assets in it and designate a trustee who will provide monthly funds to your children as per your wishes as long as they become adults. It can be decided according to the children’s age or a certain milestone achievement in children’s life like going to college, getting married, buying a house, etc. It will also decide when to distribute the complete assets to the children.
While a custodial account is the one where you designate a custodian, similar to a guardian and trustee, to take care of some specific assets for your children’s benefit.
4. Planning for incapacity: In case either or both the parents become incapacitated due to illness or an accident, you must have planned for this unexpected situation as well. You must have your medical and financial power of attorney providing your designated person to manage your medical and financial matters on your behalf during your inability. You must name at least two persons so that if one is not available then the other can do that on your behalf. However, you must ensure that a guardian and conservator are named for this type of situation too so that your children and assets are properly taken care of. Disability income insurance is recommended for such cases as life insurance does not cover disability.
5. Providing a letter of instruction: Apart from the basic documents of an estate planning viz. a living trust, a last will, durable power of attorney, advanced healthcare directive, you are advised to leave a “letter of instruction” for your representatives specifying every detail to help them manage your assets. It is recommended to write separate letters for your appointed trustee, guardian, executor, conservator or personal representative as different information may be relevant to different individuals.
6. Buy life insurance: Raising children is very expensive, thus you need to plan everything so that you never run out of funds. If either of the parents dies, life insurance ensures that the other never run out of funds while providing for the surviving children. And in case both the parents die, life insurance can be used to raise the child or to fund the cost of a college education. You must opt for such insurance that is affordable and provides long term coverage so that your child will be provided with funds until he/she reaches adulthood and become financially independent. However, ensure that your beneficiary must be updated according to your wish. You do everything to protect your family but if you don’t have an estate plan then you leave your family vulnerable and unintentionally causing a lot of problems related to the family and estate. A little bit of planning can now go a long way towards lending comfort to you in the future knowing that your family will be taken care of and they will live happily!