Many young families put off estate planning because they are young and healthy and don’t need to do it yet, 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 (Terri Schaivo being an example). And while no one expects to die or become incapacitated while their family is young, planning for the possibility is smart and responsible thing to do. Also, estate planning does not have to be expensive. We offer basic packages for couples which gives a young family the essential legal documents they need. Young families should also consider purchasing term life insurance, then update and upgrade their estate plan and insurance policy as their financial situation changes.
Why Is Estate Planning For Young Families So Important?
A good estate plan for a young family will include the following:
Naming a Guardian for Minor Children
This is the number one more important reason young families should create an estate plan as soon as possible. In Arizona, the only place you can name a guardian for minor children is in a last will and testament. 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. If the parents do not create a will and name a guardian, the court will pick one.
Naming an Administrator
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. It should be someone who is trustworthy, willing and able to take on the responsibility. This administrator can either be in the form of a personal representative (under a will-based plan) or a successor trustee (under a trust-based plan).
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. In most cases, assets will transfer automatically to the surviving spouse under the laws of intestate succession or via beneficiary designation – but this can vary greatly depending on the family situation. In addition, 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 an estate plan, the court will appoint someone to oversee the children’s inheritance. This could be the person the judge picks as a guardian for the children, or it could be someone else like another relative or friend or a public fiduciary. It will cost money (paid from the inheritance) and the children will receive their inheritances in equal shares when they reach 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 medical powers of attorney that give 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.
You can get started on your estate plan today. Call me, Abigail Neal at (480) 699-7992 to get started.