The Basics of Estate Planning for Young Families & Families with Dependent Children
I. Your Medical Decisions
II. Your Financial Decisions
III. Distributing Your Assets After You Pass Away
Short list of what you need to remember:
1. MAKE SURE THAT YOUR BENEFICIARY DESIGNATIONS AND TITLING OF YOUR ACCOUNTS WORKS WITH YOUR DOCUMENTS. I know some people who have named a trusted family member as the beneficiary of a life insurance policy with the understanding that this family member will hold the money for their younger children in the event of an untimely death. (Example: “Oh, I don’t need a trust for my kids. I put my brother Chad on my life insurance and he’s going to make sure the money is there for them if I die.” K, first of all it’s not “if” you die, because you are for sure going to die, this is a thing that will happen to all of us. Also, what happens if Chad gets married and has kids of his own who need the money and his new wife Karen decides some of the money should go to them? What if Chad is sick???). In short, this is so dangerous. That family member might predecease you, or may be unwell at the time you die. Also, they might just simply not use the money in the way that you intended, and there is no way for your children to hold that person responsible. The safest way to ensure that your wishes are followed is to let your legal documents do the job they were drafted to do — review your beneficiary designations with your estate planner and preferably your financial planner and make sure that everything works together.
2. REVISIT THIS DOCUMENT ONCE A YEAR. The last thing you want is to remember right before you go in for major surgery that your Will indicates a once-close friend would be your kids’ guardian if you pass away, but you and that person had a falling out and you are no longer on speaking terms. Take a look at your document once a year, or sooner if you’ve had any major life events, and make sure no changes are needed or (if they are) make an appointment with your estate planner to discuss the changes.
3. FIND OUT WHETHER A TRUST, A WILL, OR SOME COMBO OF BOTH IS THE BEST WAY TO DISTRIBUTE YOUR ESTATE. In some states, a trust or several trusts may be the best way to distribute your estate for lots of different reasons — maybe the probate process in your home state is expensive and time-consuming and best to be avoided if at all possible. Don’t assume that a trust is the best option for you instead of a last will and testament — it may be possible to use a simple will which contains trusts for your children that spring into effectiveness only until after you pass away and only if your spouse has predeceased you. Check with your estate planner and make sure you understand, fully, why you are using the document that has been recommended to you.
If this feels complicated, that’s because . . . it is complicated. Establishing a backup plan to make sure the right tools are in place in a situation where you become ill or pass away while your kids are still young is not an easy thing to do — because your life IS complicated. When you are the person others are depending on, however, you owe it to these people to make sure they remain cared for in the best way possible if you weren’t here to do it. For those of us who have children with complex needs, we know (likely better than most) that human life is so terribly fragile, and unpredictable. Is establishing an estate plan easy? No. Not usually. Will it be your favorite activity? If it is, I worry for you. Do this for the people in your life who are counting on you. Do it for yourself. No matter what drives you — take this information and get it done.