Planning for Young Children
Young couples with children are usually in the beginning stages of their careers and estate planning is often far from their minds. Nevertheless, if you find yourself at that stage in life, you still need to develop an estate plan.
An estate plan generally refers to powers of attorney, advance medical directives, and a will or trust. While it is understandable while you may be focused on the child’s immediate needs, you should remember to make preparation for your child if something were to happen to you.
Step 1 – Living Documents
The first step is taking care of your own planning needs. That means executing health care and financial powers of attorney to allow your spouse or other trusted person to make decisions on your behalf if you are unable to do so. These documents will ensure that the person can not only make decisions for you and your assets, but also use your assets to help your child.
Step 2 – Choosing a Guardian
If you are unable to care for your child, who would you want to care for him/her? Choosing a guardian to act in your absence, and documenting this directive in your financial power of attorney and will, provides guidance to the probate court when determining custody. Ultimately, the probate court will decide who should serve as guardian, but the wishes of the parents are usually given great weight.
Step 3 – Setting Up a Will and Trust
What would happen to your assets if you died young and left them to a minor child? Many people forget that minors cannot own property. Making sure that your assets are set up properly can avoid a disaster. Would you want unnecessary court oversight for assets left for the benefit of a minor child? Would you want to leave everything to an 18 year old? If not, consider creating a trust to hold your assets.
Creation of a trust necessitates a trustee to be named. A trustee has the responsibility of investing the assets and distributing the assets for the child’s benefit. In many cases, the trustee continues to manage the assets even after the child reaches age 18. In addition, the trustee is given direction on when to distribute the assets from the trust. Common reasons for asset distribution include the child’s health care, education, maintenance, and support costs.
If you would like to learn more about creating a trust or naming a guardian for your child, please contact AlerStallings today.