How to Use estate planning to protect your children
29 Nov How to Use Estate Planning to Protect Your Children
Planning for your family’s future isn’t always easy, especially when you have to consider all the “what-ifs.” One of the most meaningful ways you can protect your children is setting up an estate plan that reflects your wishes for their care and provides for their financial security.
Estate Planning is not just for the wealthy. It’s for everyone who wants peace-of-mind knowing that their children will be provided for. Step 1: Name a Guardian for Your Children in Your Will
Naming guardians for your children can be one of the most important aspects of estate-planning for parents with young children. This step is particularly important if you are a single parent. If you don’t specify a guardian in your will, a court will make this decision. Choose someone who shares your parenting style, has emotional and financial stability, and has values that align with yours. Talk to your guardian in advance to make sure they are willing to take on the responsibility, and understand your expectations.
Step 2: Set Up a Trust for Financial SecurityTrusts are a powerful tool you can use to protect your children’s financial future. You can control when and how much money your children inherit. This way, they won’t receive a large amount before they are ready. You can specify the amount of distributions and the timing, and the funds are managed by a trust until your children reach adulthood. A revocable trust also keeps your assets out of probate, so your children get the most out of their inheritance.A
special needs trust is designed for families with children who need long-term care and support. A trust that is carefully structured will protect your child’s inheritance and ensure they are always taken care of. You can use a special-needs trust to ensure that financial resources are available for your childe to support them without jeopardizing the eligibility of government benefits. Establish clear distribution guidelinesIf you have children under 18, they cannot inherit money directly. If you die, a court will appoint a guardian to manage your funds – unless you have set up a trust. You can allocate certain amounts to education, health care or other needs, as they grow, by setting up clear guidelines for distribution. You can also set milestones based on age for distributions so that your children receive significant portions of inheritance when they are financially mature. For instance, you might choose to distribute funds at ages 25, 30, and 35, or
take extra steps
to protect their inheritance from future spouses or creditors.
- Select a Responsible TrusteeWhen you set up a trust, you also need to choose a successor trustee. This person is responsible for managing trust assets on behalf your children. You can also choose a corporate trustee, such as a bank or trust company, if you prefer a more professional option. Step 3: Consider Appointing an AttorneyIn case of an emergency, whom will be able to make healthcare decisions on your behalf or for your children? A medical power of attorneys gives your representative the authority to make healthcare decisions for you if ever you become incapacitated. This is especially important if your children will be away from home or if the guardian may need temporary decision-making power. By outlining your wishes in advance, you ensure that someone you trust has the ability to act quickly in a medical emergency.
- Step 4: Name Beneficiaries and Update Your Estate Plan RegularlyAssets like life insurance policies, retirement accounts, and investment accounts all have designated beneficiaries. Update these designations when there are major life changes such as the birth of a child, a marriage or divorce. You can also designate beneficiaries for bank account, vehicle titles, etc., to keep these assets out of the probate process. You may need to update your estate plan if you move to a different state, change careers, or add new family members. Meet with your estate planning attorney periodically to review your plan and make revisions if necessary.Creating Peace of Mind for Your Family’s Future
Setting up an estate plan is one of the most meaningful steps you can take as a parent of young children. We are a family-run practice with decades of experience. We understand that each family has its own needs and goals. Phelps LaClair’s team will help you create a personalized estate planning that protects your family and gives you peace-of-mind. We are available to answer your questions in person at any of our seven offices located throughout the greater Phoenix area. Contact us today
for a free consultation and begin planning with confidence for your children’s financial future.
Photo by Jessica Rockowitz
on
Unsplash
used with permission under the Creative Commons license for commercial use 11/29/24.
