Estate plans may seem like a domain for older individuals, but they are an essential planning tool for every family. For families, the most important question is who will raise your children if you cannot. Choosing a legal guardian is one of the most personal and difficult decisions in estate planning, but it’s better made in advance than left to a court. Think carefully about who shares your values, parenting style, and hopes for your kids. Be sure to talk to your chosen guardian beforehand and consider naming a backup in case your first choice isn’t available when needed. Some families even name different guardians for different children according to their individual needs.
Wills and trusts
Your children’s guardian(s) will be named in your will along with your executor, the person responsible for ensuring that your assets and savings are managed and used according to your wishes. If you die without a will, the state will make these decisions for you, and the outcome may not align with the intentions you have for your family. Ensure that your will meets your state’s legal requirements and update it after major life changes such as a birth, a divorce, or a move to another state or country.
If you want more control over when and how your children receive money, consider setting up a trust. A trust allows you to dictate how your assets will be managed and at what age your children will gain access to them. You’ll appoint a trustee to manage the funds until that time. A trust can also help your family avoid the delays and costs of probate court, which is especially beneficial during a period of grief. Additionally, trust documents remain private — unlike wills, which become public record. A revocable trust (also known as a living trust) offers the flexibility to make changes to terms and conditions as your situation evolves and your family grows.
Life insurance and living wills
Life insurance is another important planning tool. In the event of your death, a policy can provide immediate funds to cover day-to-day expenses such as mortgage payments, child care, food, and education. Most policies also help cover funeral costs and outstanding debts. For young, healthy parents, term life insurance is usually the most affordable option, and online tools make it easy to compare rates from multiple providers.
It’s also wise to plan for a situation in which you’re still living but unable to make decisions. If you become incapacitated, a durable power of attorney allows someone you trust to manage your finances and legal matters. A living will — also called an advance directive — outlines your preferences for medical care, including decisions about resuscitation, life support, and organ donation. These documents help ensure your wishes are carried out and avoid confusion during medical emergencies.
Staying current
Beneficiary designations on retirement accounts and life insurance policies should be reviewed regularly. These designations override what’s written in your will, making it crucial to keep them current and up-to-date. Life changes, such as a new baby, a divorce, or a move to a new state, are good reasons to reassess your plan. Even if nothing has changed, aim to review your documents every few years to ensure they still reflect your goals and values.
Estate planning might seem far off when your family is young and growing, but it’s one of the most loving things you can do for your family. It provides your children with a clear path forward and offers you peace of mind, knowing that even in the worst-case scenario, they’ll be cared for by the people you choose, in the way you want.
The Mackay Dressler law firm offers regular estate planning presentations aimed at educating families about their planning options. Register for a free workshop, and after you attend, you will receive a free consultation with an attorney to answer any questions about setting up your estate plan ($425 value).
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