Do you have young children? If you do, you do everything you can to protect them. That includes baby-proofing your house, watching your children like a hawk, and as they get older, teaching them about safety. Part of protecting your young family is to address what would happen to your children if you passed away unexpectedly or became disabled. To fully protect your children, you should have an estate plan in place — including a will, a financial power of attorney, and an advanced health care directive – that addresses your needs as a young family. Here are four helpful tips on what an estate plan for your young family should include.
Tip #1: Have an estate plan in place to protect your family
Having an estate plan – including a will — allows you to direct how your assets are distributed and who receives them. However, if you die without a will, the State of Pennsylvania has an estate plan for you. It can have unintended consequences. For example, if you do not have a will but have minor children, Pennsylvania law dictates that at your death, your estate will be divided between your spouse and your children. This is less than ideal, as explained further in #3 below.
Tip #2: Name guardians for your minor children
The importance of naming guardians in your will for your young children cannot be overstated. If you and your spouse were gone, and you have not designated guardians for your minor children, then the court in the county where you live may do it for you.
Tip #3: Create a trust under your will for your children
Having your children directly inherit under your will is also problematic because minor children cannot legally hold title to property. If your child directly inherits more than a minimal amount of property or money, a court may appoint an independent guardian to oversee your child’s finances even if there is a surviving spouse. To avoid a guardianship, which is expensive and cumbersome, include a trust and name a trustee in your will. The trust will hold your child’s inheritance and the trustee will oversee distributions to your children until they are adults and can responsibly handle money.
Tip #4: Make sure your beneficiary designations are up to date
Inheritance of financial accounts (e.g., 401(k) and IRA) and life insurance is generally controlled by beneficiary designations you make during your lifetime rather than your will. That means that the beneficiaries you name on the form provided by the financial institution or insurance company dictates who inherits that asset, even if you name a beneficiary for that asset in your will. Accordingly, it is important to name primary and contingent beneficiaries for accounts and financial products with beneficiary designations to make sure that your property goes to who you want. And where you have minor children, you can name a trust under your will or a Uniform Transfer to Minors Account to be the beneficiary to receive the inheritance from such accounts.
If you have questions about estate planning for young families, please contact me at firstname.lastname@example.org or my office through my website at www.brkoganlaw.com.