You’ve recently given birth to or adopted your first child and life is so different now! First of all, we congratulate you on this beautiful and momentous event. Children are the best of us!
But we also understand that having a child makes you realize there are some things in life that you don’t know enough about.
Maybe you had an estate plan in place prior to having your child. Or maybe it never occurred to you that you need one until now. But now that you have a child you’re thinking about what happens to them if something happens to you.
Today we’ll look at some elements of an estate plan and how they ensure your children will be well taken care of no matter what.
Last Will and Testament
A Last Will and Testament is a legal document which outlines your wishes for how your assets are to be distributed after your death. You are probably very familiar with this document because it is the most popular of the estate planning tools. It is important to note that Wills do not hold any power while you are alive. This document comes into effect only after your death.
A Will allows you to name key people to do and receive certain things at the time of your death. A Will is where you name an executor who will carry out the wishes you laid out in your Will through the probate court. A Will also allows you to name a guardian for any minor or special needs children under your care— designating who it is that will care for your children should you die before they turn 18. A Will also allows you to name beneficiaries to receive assets after your death.
You can also create testamentary trusts within your Will to hold the assets until a child reaches a certain age or achieves certain goals. This is a great tool but if you are thinking you will need to create a testamentary trust it may be best to use a Trust as the primary estate planning tool.
Trust
There are many different types of Trusts. For the sake of this article we are going to address the most popular type of Trust: the revocable living Trust.
While a Trust is similar to a Will in that it outlines your wishes for how your estate will be disbursed upon your death, it operates very differently.
The moment it is signed the Trust is signed it comes into effect— and becomes legally binding until it is amended or revoked. A Trust is a legally binding contract between you— the grantor or trust maker, and your trustee— also you (in most cases). You transfer the ownership of your assets from your personal ownership into the Trust to be owned by the Trust and managed by the trustee. The Trust allows for specific uses of the assets, which are often very broad during your lifetime, and then get much more specific after your death.
All Trusts become irrevocable when the trust maker dies. This means no one can change them— not even a successor trustee or beneficiary. And Trusts are much less susceptible to legal battles. We often see and hear of long, drawn out court battles over a person’s Will. Because a Trust becomes legally binding when it’s signed and begins operating immediately there is little ground for legal battles.
Trusts are amazing estate planning tools for many reasons, but the most significant reason for parents is the ability to create beneficiary Trusts for minor children. When creating your Trust you can break your estate into pieces for each beneficiary and create rules for when they can receive their assets. You can get very strict or very lax with the rules. You can also leave rules for when a legal guardian can withdraw funds from the Trust. These options allow you to create a secure future where your children can live and thrive.
If you have a child with or suspect your child may have special needs, you can create a special needs Trust within your Trust. This can be very important to your child’s long term well-being because an inheritance could knock your child out of eligibility for government resources. Special needs planning safeguards your child’s inheritance and their access to government resources.
Only a Will Can Name a Guardian
While a Trust is an incredibly powerful estate planning tool, it can’t do it all! Your Trust cannot name a guardian for your children. This is one reason why a Will is so important and you absolutely need one. It provides instructions as to who cares for your children after your death. A Trust cannot name a guardian because your children are not assets or property. They are people so they cannot be owned by a Trust. Trusts only direct assets.
So, if you have a Trust, you have to have a Will. If you have a Will, you don’t have to have a Trust— but it may serve you better than just a Will. This is why working with a skilled estate planning attorney is crucial when it comes to all estate planning, but especially when you have minor children. A professional like those at Siedentopf law will shoot you straight and give you all of your options to help you curate the best plan for your family.
Standby Guardian
We believe a standby guardian is another non-negotiable in estate planning if you have minor children. Yet, many parents have never heard of this!
A standby guardian is a separate designation allowing you to name a guardian to step in should something happen to you while you are still living and you become unable to care for your children. An example could be a medical event leaving you in the hospital for a week, an overseas vacation where you’re leaving someone trusted in place to care for your children, a legal situation where you find yourself in jail, or even your own kidnapping.
As with every estate planning document, we always hope we never need them. But if we do, having them in place now gives you peace of mind for your child’s future.
A Standby Guardian document allows you to name someone to stand by, on call essentially, to care for your children should you be unable to while you are alive. Because the intent of this document is to cover for short absences by you, it is not always necessary to name the person you would choose to step in and parent your children after your death. In many cases that long-term forever guardian may live out of state or overseas– and that is okay for the long-term guardian. But it’s not good for the Standby Guardian. We always recommend you name a person that lives no more than an hour away from you. Remember, this person would need to jump in do school drop offs and pick-ups, take your kids to their pediatrician, etc. It’s not helpful to have a Standby Guardian that has to fly in from the other side of the country to do a school pick up because you’re hospitalized from a car accident. Pick a Standby Guardian who is local to you.
Other Estate Planning Tools To Consider
There are many other pieces to estate planning to consider– from the proper beneficiary designations on life insurance policies to an Advance Directive for Healthcare. You have options to provide both peace of mind and a legacy for your children.
Working with a team of skilled legal professionals— who know estate planning and who are parents themselves is the best place to start. We can help all of this make sense for your family. And we can ensure that you don’t miss a key piece of your estate planning puzzle.
Being a parent is hard, but rewarding work. Planning for your child’s future is often on your mind. Planning for their future without you is an important piece of the puzzle of raising kids. We can help you get the exact tools in place that cover all the bases to give you the peace of mind you deserve! Call us at (404) 736-6066 to schedule a consultation.
