Estate Planning for Young Families

February 25, 2014. Many young families put off estate planning because they are young and healthy, or because they don’t think they can afford it. But even a healthy, young adult can be taken suddenly by an accident or illness. And while none of us expects to die while our family is young, planning for the possibility is prudent and responsible. Also, estate planning does not have to be expensive; a young family can start with the essential legal documents and term life insurance, then update and upgrade as their financial situation improves. A good estate plan for a young family will include the following:

Naming an Administrator or Financial Power of Attorney

This person will be responsible for handling final financial affairs—locating and valuing assets, locating and paying bills, distributing assets, and hiring an attorney and other advisors if needed. It should be someone who is trustworthy, willing and able to take on the responsibility.

Naming a Guardian for Minor Children

Deciding who will raise the children if something happens to both parents is often a difficult decision. But it is very important, because if the parents do not name a guardian, the court will have to appoint someone without knowing their wishes, the children or other family members.

Providing Instructions for Distribution of Assets

Most married couples want their assets to go to the surviving spouse if one of them dies. If both parents die and the children are young, they want their assets to be used to care for their children. Some assets will transfer automatically to the surviving spouse by beneficiary designations and how the title is held. However, an estate plan is still needed in the event this spouse becomes disabled or dies, so that the assets can be used to provide for the children.

Naming Someone to Manage the Children’s Inheritance

Unless this in included in the estate plan, the court will appoint someone to oversee the children’s inheritance. This possibly could end up being a friend of the judge and a stranger to the family. It will cost money (paid from the inheritance) and the children will receive their inheritances in equal shares when they reach legal age, usually age 18. Most parents prefer that their children inherit when they are older, and to keep the money in one “pot” so it can be used to provide for the children’s different needs. Establishing a trust for the children’s inheritance lets the parents accomplish these goals and select someone they know and trust to manage it.

Reviewing Insurance Needs

Income earned by one or both parents would need to be replaced, and someone may need to be hired to take over the responsibilities of a stay-at-home parent. Additional coverage may be needed to provide for the children until they are grown; even more if the parents want to pay for college.

Planning for Disability

There is the possibility that one or both parents could become disabled due to injury, illness or even a random act of violence. Both parents need their Health Care Power of Attorney that gives someone legal authority to make health care decisions if they are unable to do so for themselves. (You would probably name your spouse to do this, but one or two others should be named in case your spouse is also unable to act.) HIPPA authorizations will give doctors permission to discuss your medical situation with others (parents, siblings and close friends). Disability income insurance should also be considered, because life insurance does not pay at disability.

The Key Take Aways

You are never too young to prepare an estate plan. You do not purchase house insurance intending to use it—it’s there for you to be prepared, just in case. Same with having your estate plan—it provides you peace of mind that you have a plan in place, just in case.

To help you develop at least the essentials of an estate plan, please call Goosmann Trust Law Counsel at 712-226-4000 or email info@goosmannlaw.com. For more information about estate planning for young families and where to get started visit the Goosmann Trust Law Counsel website.