Estate Planning Essentials For Parents
All parents should have a properly executed estate plan, regardless of the size of their estate. This is particularly the case for parents of minor children (under 18-years-old). Regardless of what stage of life you are in, it’s important to prepare for the unexpected.
At Thomas Walters, our estate planning attorneys are up-to-date on estate tax law and regulations, the rules governing ongoing Trusts, and other matters relating to protecting your loved ones.
If you are a parent of a child under 18-years-old, contact our office to set up the following estate planning essentials for parents:
NOMINATE A GUARDIAN
One of the most important features of an estate plan is the ability to nominate a guardian for your minor children. This guardian would care of your children if something were to happen to you and the other parent.
The person you select as your children’s guardian would ultimately raise your children. That person would also be a primary source of support for them during a difficult time. Thus, you and the other parent will want to consider several factors. Will your children have to relocate to a different school district? Can the potential guardian financially care for your children? Do you expect the potential guardian to remain in good health until your children turn 18-years-old? Perhaps the most relevant factor to consider is whether the person would want to take on the role. Have an honest and realistic conversation with the person you are considering.
If you pass away without a plan in place, or if your selection falls through for whatever reason, a judge will appoint a guardian for you. The judge will decide based on what he or she considers to be in the child’s best interest. Unfortunately, that decision may not align with what YOU consider to be in their best interest. In some cases, children are sent to Child Protective Services while the judge decides on the proper guardian. For these reasons, we advise all of our clients to include two backup options for guardianship. If your circumstances or the potential guardian’s circumstances change, our office offers a Lifetime Lawyer Guarantee, which allows our clients to make changes to their estate plan for no additional charge. We understand that circumstances change.
PLAN FOR A CHILD’S INHERITANCE
Not only must you consider who will look after your child, but you must also consider who will look after your child’s inheritance. If your minor child or grandchild might inherit assets from you, we strongly suggest you place those assets in a Trust. Doing so keeps the courts out of the assets, and it protects the minor from squandering the assets before he or she is financially responsible.
A Will that leaves anything to a minor (a child under 18-years-old) requires a Guardianship court proceeding. At this proceeding, a judge will appoint someone to manage the minor’s inheritance until they turn 18-years-old. If the minor needs those funds before turning 18-years-old, a judge must approve the expenditure in advance.
Alternatively, you can name a Trustee to manage the assets, in accordance with your wishes, without involving the courts. You can do so by providing in a Revocable Living Trust that the minor’s funds be placed in Trust your death. Typically, the Trust would authorize your designated Trustee to use the funds for your child’s health, education, and welfare.
You can also designate an age in which your child would receive the remaining funds in the Trust. The default age is 25-years-old, but you can choose any age you wish. If you prefer your child does not receive all remaining funds at once, you can elect that the funds be distributed sporadically. A Trust provides a lot of flexibility, and allows you to control the inheritance.
UNDERSTAND SPECIAL NEEDS TRUSTS
Individuals with certain disabilities can receive cash benefits and medical coverage from various government programs. To qualify for these benefits, the individual's income and resources must not exceed certain levels. If a parent leaves a bequest to a special needs child, the inherited assets may preclude the child from receiving the benefits.
Government rules, however, allow those assets to be held in a “Special Needs Trust” for the benefit of a special needs child. This method preserves the government benefits.
Special Needs Trusts are typically designed so that the Trust assets can be used to supplement, rather than replace, government benefits. Trust assets are typically distributed to third parties to pay for items other than food and shelter of the disabled individual. There are multiple types of Special Seeds Trusts. Consult with a qualified attorney before determining which type should be prepared, and whether this type of Trust is right for you and your family.