You may have a stockpile of diapers, a dresser full of onesies and a shelf full of books ready for the arrival of your new baby, however, you and many new parents like you, have likely overlooked a very important tool in your parenting toolbox: a proper estate plan. Typically, young couples and new families haven’t had time to accumulate wealth. They wonder why an estate plan is even necessary. Well, you now have something far more important than riches and possessions to protect; you are now responsible for protecting an actual human life. Now, what if YOUR hands are no longer available to care for this precious little person that you’ve brought into the world? There are three legal documents that are critical for all parents, regardless of net worth, to put into place in case they die or become incapacitated.
Will: If you pass away without a Will, Ohio law sets out default guidelines as to who inherits your assets and property. Guardianship of your child, however, is not a given and the Court would choose a guardian for your child without knowing your true wishes. A Will allows you to nominate a guardian of your child’s estate and your child’s person. Wouldn’t you prefer that the Court knew who you wanted to raise your child? In order to do so, you need a properly drafted Will.
Durable Financial Power of Attorney: What if both parents become incapacitated and are unable to care for their child? A durable financial power of attorney is necessary to ensure guardianship of the child’s estate. Without this important document, the child’s caregiver will have difficulty accessing the financial accounts to ensure that your minor child is taken care of while you are incapacitated.
Trust: A trust allows you to specify, through designated powers and duties, how your property will be used to support your family after your passing. If one parent passes away, it is imperative that the other parent has sufficient funds to care for the children. Without proper estate planning, the living spouse may have limited access to the deceased spouse’s accounts and assets, and would have to seek permission from the Court before those funds can be accessed.
If both parents pass away, a trust provides a structure and control mechanism for a child to benefit from assets, including cash accounts or life insurance proceeds, at a young age. As grantor of the trust, you can specify the age at which your child will receive their inheritance. These rules greatly increase the likelihood that the child will responsibly spend what is often a large sum of money. For example, many parents allow their child to receive one-third (1/3) of the trust principal at age 25, another one-third at age 30 and the balance at age 35. Parents who have the foresight to plan this way ensure that their children will have money for education expenses, a wedding, or even a down payment for a house.
The future depends on what you do today. Proper estate planning gives you the peace of mind of knowing that your child will be taken care of financially and placed in the right hands, no matter what the future holds. Whether you are single or married, it is imperative to get estate planning documents in place once your little bundle of joy arrives.