Five Disasters Parents Can Avoid Through Simple Estate Planning
April 12, 2019
By: Kelly A. Zerillo
Having a child changes everything in the lives of a young couple. Not only is there less time for leisure activities, like long weekend brunches or nights of Netflix binges, but there is also less time to focus on implementing important protections for your family, like estate planning.
People tend to wait to create an estate plan for many reasons - often because they do not want to consider their own mortality, because they do not think that they have enough assets to justify creating a plan, or because they think that they have all the time in the world to finalize their estate plan. However, these are all misconceptions that can lead to unintended consequences for your loved ones. Adults of all ages should ensure that they have an estate plan that meets their needs.
Listed below are five common consequences you can easily avoid through executing basic estate planning documents. A little effort and a few uncomfortable conversations are all that is needed to avoid (sometimes irreversible) consequences for your family.
Your Weird Cousin Will Raise Your Children. If you died today, most likely, your child’s other parent would care for your minor child. But if the unthinkable happened, and you both pass away while your children are minors, who would care for them? Failing to select a guardian will result in a court appointing a guardian for your children - this may (or, often, may not) be someone that you would be happy with raising your children. Through a simple estate plan, you can select a guardian who will take care of your minor children and their property until your children reach the age of majority. When selecting a guardian, parents should consider whether the guardian is physically capable of caring for children, whether the guardian shares the same values as you and your spouse and whether the guardian has stable finances and personal relationships.
Your Flaky Brother Will Manage Your Estate. If you die intestate (i.e. without a will), then the court will appoint an administrator to administer your estate. With smart planning, you can instead designate an executor to manage your estate upon your death. Your executor will be responsible for locating your assets, paying all bills and taxes, and distributing assets to your heirs. You should select a trustworthy and responsible close friend or family member to serve in this role and you should make them aware of their role in your estate plan.
Your Kids Will Get Half of Your Assets. Each state has default rules for who inherits your assets if you die intestate. Currently in New York, for example, if a person dies survived by a spouse and a child, the spouse will inherit the first fifty thousand dollars ($50,000) and one-half of the remaining estate, and the child will inherit the remaining balance outright if over the age of eighteen. Worse yet, if your child is a minor, a property guardian will be appointed by the court and such guardian must seek court approval when making distributions and provide an annual accounting to the court. Most people would not want to rely solely on their state’s laws to determine who inherits their assets and, further, would not want their child to inherit at the age of eighteen or have to seek the court’s approval for each distribution he or she wishes to make on behalf of a minor child. By executing a will, you can generally distribute your property however, and to whomever, you wish.
Your Child’s Bookie Will Take Your Money. Most people wish to leave some or all of their assets to their children upon their death. While your children are young, it might be difficult to imagine that in the future, it may be a disservice to your children to distribute your assets outright to them. However, inheriting assets outright will lead to that property being immediately available to your children’s creditors. For example, your child might be in the middle of a divorce or a lawsuit or have substance abuse problems at the time of your death. By leaving your child’s inheritance in a fully discretionary trust for their benefit under your will and naming a trusted loved one as the trustee of that trust, your child will be able to receive as much property as he or she needs while protecting that property from any creditors.
Your Relatives Will Fight While You’re in a Coma. In addition to death, there is also the possibility that one or both parents may become incapacitated during their lifetimes. You should consider executing a health care proxy and power of attorney, which gives another person the legal authority to make medical decisions for you (health care proxy) and manage your finances (power of attorney) if you’re unable to do so yourself. Otherwise, a doctor can unilaterally make important medical decisions for you, which may violate religious or personally held beliefs you have about your care. Additionally, without these documents in place, your relatives may fight about what they think is best for you and may have to go to court to seek the appointment of a guardian to make decisions.
Conclusion. For all young families, it is imperative that you consider estate planning in order to make well-informed decisions for the benefit of your loved ones. An experienced estate planning attorney can guide you through the process and draft an estate plan that is tailored for your family to ensure your family and your legacy are protected.