Between careers, school, and after-school activities, young families have hectic schedules. And new parents are consumed with diapers, feeding schedules, and trying to get much-needed sleep. It can be hard to think about the future when you are so occupied with the present. But estate planning is something essential that young parents need to think about. Putting your last wishes in writing is critical for ensuring that your family is taken care of when you pass away.
Estate Planning is for the Wealthy, Right?
Many young parents believe that estate planning is not valuable or necessary since they do not have a lot of assets. But estate planning is not just for the wealthy. Your estate is all the assets you leave behind when you die, including bank accounts, 401(k) plans, houses, or vehicles. An estate plan ensures that your assets get to the desired people, your debts are paid, and that your family is taken care of. Without an estate plan, estates generally must go through probate. Probate can be a lengthy and expensive process.
Where Should I Start with Estate Planning?
Young families do not need extensive assets to make estate planning valuable. Here are four key estate planning tips that every parent needs to take to make sure they have protected their child or children regardless of what the future holds.
1. Make a Will and name a guardian for your children.
A Will is where parents name the successor guardian for their children. By naming a guardian, you get to choose who raises your children if you are not here to do so. You can choose a friend or relative that shares your values and will do a good job raising your children. You do not want family members fighting over who should care for your children, and you do not want this decision left to the court. This is one of the most important estate planning items parents can do, and it should be done as soon as your children are born.
2. Buy Life Insurance.
Raising kids is expensive. If one parent dies, life insurance makes funds available for the surviving spouse to continue caring for the children. If both parents die, life insurance can be used by the successor guardian to raise the child or fund higher education costs.
For most parents, term life insurance is the most sensible choice. The premiums are affordable, and the coverage will be in effect long enough for your child to grow up and no longer be financially dependent.
3. Update your beneficiaries.
Many accounts you own may already have a designated beneficiary. IRAs and 401(k) accounts generally require you to specify who inherits these assets should you die. Normally, your spouse or life partner would be your primary beneficiary if you share children with that individual. You can make your children your secondary beneficiaries so they will inherit in case of your death.
4. Consider setting up a Trust.
The law prohibits minor children from taking control of the inheritance. If you die before your children are 18, the court could appoint someone to manage the assets you leave your kids. If you want to designate who will manage assets, how your money and property are used for your children, and when your children should receive a transfer of inheritance, a transfer of inheritance, a Trust should be considered.
Trusts are not just for the wealthy. Anyone who wants more control over how their assets would help their children if they were gone should contemplate a Trust.
This is a difficult topic.
No one likes to think about death. It is tough for young parents to imagine not being around to raise their children. But having an estate plan will ultimately give you peace of mind knowing that your family will still be provided for should you pass away.
Contact us today to schedule your complimentary consultation. It would be our privilege to help you create your estate plan. Follow us on Facebook and Instagram at @michaelpaullaw for regular posts about estate planning.