While we can’t always prevent a fatal accident or illness, we can take steps to ensure that our children would receive the best care possible in the worst of circumstances. If you haven’t already done so, talk to a financial advisor or estate planning lawyer about putting a plan in place for your family.
We all know that we’re supposed to have a will in place as soon as we have kids. But why, exactly, IS it so important? There are a number of reasons parents with young kids should have planning done – and the reasons extend far beyond who will receive your assets. Below are some of the reasons you might want to have a high-quality plan in place.
#1 You want to choose who would take care of your kids.
Without a will that designates a guardian for your kids, the question of who will raise your children will be decided by a judge – someone with no knowledge of your kids or how you would want them raised. A guardianship provisions in your will allows you to tell the judge who you think is the best person to take care of your kids. Read more about the importance of guardianship.
#2 You want to protect your children’s privacy.
In addition to a will, most parents with kids under the age of 18 should have a trust in place. Assets left to children directly must be held in court-supervised accounts that require regular accounting of the amount of money in each account and how it was used. This information is filed in the courthouse and often becomes a matter of public record – making your children vulnerable to predators and identity thieves. By having a trust in place, these matters are kept private – and out of reach by criminals and other unsavory characters.
#3 You don’t want your kids to have access
to their entire inheritance at the age of 18.
A trust is also necessary to prevent your children from having unrestricted access to their inheritance at the age of 18. That’s exactly what would happen without one. With a trust, you can specify the age at which you think your kids would be mature enough to have full access to their inheritance, and it probably isn’t age 18.
#4 You want your assets to be allocated to your children fairly.
If you have more than one child, assets that are left to your children directly would be held in a separate account for each child and supervised by a court. The assets in each account could only be used for the child to whom it was allocated, making it impossible distribute a disproportionate amount to a child who has unexpected medical or other financial needs.
#5 You want to ensure that important family expenses
would continue to be paid if you became incapacitated.
If you ended up unconscious in the hospital, important family expenses – such as your nanny, mortgage, and private school tuition – could go unpaid for a substantial length of time. A Power of Attorney allows a trusted person to take over those responsibilities for you. Having a Power of Attorney in place is critically important if other people – like your kids – are financially dependent on you.