Minors and Estate Planning
Every family with minor children should have a plan for their children’s lives in case something happens to the parents. It is a worst-case scenario. However, it is one that responsible parents should prepare for.
What is needed in an estate plan when there are minor children?
Some estate planning documents are needed at any stage of life, including a will, a power of attorney and a health care power of attorney. The will nominates a guardian to raise the children. Guardians are often siblings, parents, or trusted family friends.
How does a young family ensure there is money for young children?
Life insurance policies are often used to provide for minor children. However, minor children may not inherit assets directly. A life insurance policy is commonly used in conjunction with a trust to safeguard funds. A trustee has a fiduciary duty to be responsible for managing the money for the child’s benefit.
Does a guardian automatically have the right to make decisions for minor children?
A guardian has the same power to make decisions for a child as if they were the child’s parent. The guardian provides care, maintenance, and support, and makes decisions about where the child will live, where the child will go to school and the child’s religious affiliation. In most states, the court maintains oversight of the guardian’s actions, and an annual report is filed to update the court on the protected minor’s status.
Should the guardian and a trustee be two different people?
These two roles have different skill sets, and it’s unlikely one person will have both. The guardian needs to be someone who will raise your child as closely as you would. The trustee needs to be good with finances and able to manage assets and honor the parents’ wishes. For example, money set aside for a college education shouldn’t be borrowed for a trip to Disneyland.
When should we create an estate plan?
Baby’s first weeks at home are a mix of happiness and exhaustion. However, once a baby is born, new parents should have an appointment with an estate planning attorney. The parents need a will to name a guardian, trusts, medical power of attorney, financial power of attorney and life insurance.
Does a family with pre-teens or teenagers need an estate plan?
Families with teenagers need an estate plan for the same reasons as newborn parents. However, with a few differences. Once the child turns 18 or 21, they can inherit if assets are not placed in a trust. Even the most responsible young adult is not ready to inherit a large amount of money. A trustee can ensure that funds are used for a college education or trade school and not squandered.
Planning Protects the Family
Children depend on their parents to protect them, while parents can rely on an estate plan to ensure that their children are protected if they are unable to care for them. It’s a necessary part of parenthood.
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