Parents have busy schedules to keep. Between preparing meals, getting the kids ready and off to school, managing the home, celebrating all the holidays and trying to keep up with our own schedules, our days can become a blur of never-ending tasks and worries. Being a caregiver to young children doesn’t give us much time to relax, or much time to think about how their futures would look without us.
When you do find the time to sit down with a trusted advisor to make your estate plan to protect your young family, make sure you avoid these common, and spooky mistakes.
(1) Forgetting to Name Guardians
What would happen to your children if you didn’t make it home from work tomorrow? Who would take care of them? How would your daycare or nanny find the people you want to care for the children? Would your children be at risk for entering Child Protective Services’ custody when you can’t be found?
Though naming a Guardian in a Will is a start to helping protect your children, it’s not enough. If you want your children to have the smoothest transition possible, and stay with the people you choose to care for them from the minute you don’t make it home, you need a comprehensive plan that includes temporary and long-term Guardian nominations.
You will also need tools to help your children’s caretakers find the people you trust to be Guardians of your children when something happens to you.
(2) Leaving Property Directly to Minor Children
Do you know what happens when property is left to a minor child? The minor child does not have access to the property until they are 18. In the meantime, the Guardian of the child is left to manage the property for the child.
Have you named a Guardian for your child? Is it someone you know you can trust to manage your life insurance policies and other property your children will inherit?
Are you a single parent, or remarried parent of minor children? Do you trust that the other parent would take proper care of your children’s inheritance if something happened to you?
You must consider all of these decisions when making an estate and wealth plan for your children. Trusts allow you to name someone who you trust to manage the child’s assets, even if the physical care of the children will go to another parent. A trust is a powerful tool to consider in your estate plan, especially for single and remarried parents.
(3) Only Having a Will
There are many cons to only having a Will in your estate plan. First, you must have an Executor who goes through a Court process to distribute the assets you left behind. This Court process is called probate. It costs a substantial amount of money and takes a lot of time to complete the probate process.
Second, a Will leaves assets outright to the person/people named. That means you run into the issues above if those people are your minor children.
Third, you cannot instruct how or when your minor children will receive assets. Let’s say you get into an accident when your child is 18. If you only have a Will, that child can manage and access all the property you have left to your child immediately. Do you think an 18-year-old will be a good steward of that property? Maybe. Maybe not.
If you have concerns about making your family go through the time and expense of probate, leaving assets directly to minors, or wanting to control distributions for young beneficiaries, a trust is more suited for your situation.
(4) Never Making a Plan
The single biggest mistake a parent can make is failing to plan at all. If you do not name Guardians for your children, your family will be left fighting over who will care for them, and the people you trust least may wind up raising them.
If you leave your assets directly to your children, the Guardian may squander them and leave your children without an inheritance.
If you leave your assets directly to a minor child who has just turned 18, they may run through the inheritance without any regard for their future.
Every plan is unique and should be tailored to your family’s specific needs and goals. The best place to start, is just to start. Sit down with your family today and think about how your young children would be cared for if you weren’t able to be there for them and find the right advisor to help you put your plan into action.