Estate Planning Fundamentals for Parents with Young Children
Updated: Jan 26, 2020
Having family members who rely on you financially is a big responsibility. While estate planning is probably not the first thing families think of when they are first taking their new baby home from the hospital, it tends to creep in with other “adulting” things like life insurance, 529 plans, saving for braces, and many others.
When the realization occurs that life is fragile, parents begin to consider what would happen to their children if both parents were disabled for a period of time, or worse yet, if both passed away? The common concerns are first, who would be the guardian of our children and second, how would my kids be taken care of financially?
While both questions are of the utmost importance, the positive news is that both goals can be accomplished by working with an estate planning attorney and putting together a comprehensive estate plan unique to you and your individual needs.
With respect to the first question, a will is usually the best document to appoint a guardian. Naming a guardian and a successor guardian in a will is the surest way to prevent a drawn out and very emotional court battle over who takes custody of your children. Choosing a guardian is a very personal decision, however it is usually best to consider location, health, age, and other values that are important to you and your spouse.
The second question; how will your children be taken care of financially is equally important. While a will achieves many goals, it is quite inadequate for financial protection of minors. Typically, a revocable grantor trust is the best option. For married couples that do not otherwise have children from a previous marriage or relationship a “joint trust” is a good planning technique.
A joint trust is a single trust that has two settlors or persons who create the trust. In general it is simple to fund and easy to manage once created. Trusts are commonly used for couples with young children because it allows them to leave assets to their children in the care of someone else, a “trustee”, who can manage the assets for them. Also, a trust allows for you to specify at what age your children are to receive distributions, thereby ensuring that your children do not take wealth prior to being mature enough to handle it. Trusts also allow parents to outline for the trustee how monies should be spent for college expenses, buying a first home, and other important moments that your young children will undertake as they grow into adults.
While a Will and Joint Trust is a great start to a comprehensive estate plan, it is also important to prepare durable financial powers of attorney, as well as, patient advocate (health care power of attorney) forms. While there are many things that parents of young children can wait on, preparing an estate plan should not be one of them. Also, while you should expect your attorney to provide value based pricing, estate planning, when you have young children, is not an area where you want to pick up a box of software from a warehouse who also sells diapers, toothpaste, and assorted other things. Having the peace of mind of a tailored estate plan, that is up to date with the most current Michigan law, as well as, an advocate that will be part of your team throughout many life events is too important for short cuts.
A bit about us – Matt Devitt Law is a full service estate planning law firm located in Livonia, MI. In addition to estate planning we also provide legal counsel for small businesses and off a full suite of real estate legal services as well.
We work with our surrounding communities including Livonia, Northville, Plymouth, Novi, Farmington Hills, and beyond. Our focus is on providing pragmatic value based solutions for your estate planning, small business, and real-estate legal needs. Give Matt a call (734) 335-0713 for a free consult.