Estate Planning Considerations for Parents with Children
One of the fundamental rules of financial planning is – for parents with children, you need to think through how you will provide for them when you die. It’s part and parcel of being a good parent. Taking care of your children essentially means two things. The first is providing for their financial needs so they have a place to live, food, shelter, the ability to get an education, and other essential living needs. The second is arranging for caretakers if both parents pass away before the children reach the age of majority. The age of majority in Florida is generally 18. There are some exceptions.
Preparing a will
The main purpose of preparing a will is the designation of a guardian for the children. When one parent dies, normally the other parent will take care of the children. The problem is what happens when both parents die? Someone needs to give the children a place to live, to raise the children on a daily basis, to help the children with any medical needs, and just to love and spend time with the children.
If there is no guardian appointment through a will, then a local judge will decide who the guardian is. This could lead to a contest among relatives. It may not allow for a friend to be the guardian.
General guardian appointment considerations
The person drafting the will should speak with the people they want to be guardians before they sign the will. Being a guardian is a major commitment. Parents should discuss the appointment thoroughly with the people they have in mind to see if they agree. Guardians can be the parents, siblings, aunts and uncles of the testator They can be friends of the family – often friends who have children of similar ages.
The will should appoint alternate guardians in case the original appointment cannot or does not want to be the guardian of the children.
Other reasons to write a will if there are children
A will can clarify who gets what assets. Without a will, the assets will go according to the intestate laws of distribution for Florida.
A will is also where a parent designates who will be the executor of the will. The executor probates the will, collects the assets, pays the appropriate taxes and creditors, and then distributes what’s left to the heirs.
Wills can designate how the funeral and burial expenses are paid.
Purchase Life Insurance
Parents should review how much money the children will need if they die too early. Minor children have numerous expenses including food, clothing, shelter, and education. A Florida probate and wills attorney can help parents decide how much insurance they need. The lawyer will also explain that the policy should name the beneficiaries – a spouse and then children – so the insurance does not need to pass through probate. The lawyer and the insurance carrier can explain the different types of life insurance and how each type can benefit the children.
Prepare durable powers of attorney and living wills
These documents are medical directives in case a parent’s health deteriorates without time to make alternate arrangements. A parent my suddenly have a heart attack or develop dementia. There’s always the risk that a health parent could suffer car accident injuries or other types of injuries.The directives helps direct what medical decisions will be made for the parent.
A living will essentially states what type of end-of-life care the parent wants. It includes decisions such as when a respirator or other artificial means of life support should end. It can also include directives about palliative care if they are in pain and whether the parent should be resuscitated.
Durable power of attorney for health reasons
A durable power of attorney assigns to another person the power to make medical decisions on their behalf.
Durable power of attorney for financial reasons
A durable financial power of attorney directs another person to have authority over the parent’s financial assets. This includes the ability to sign and deposit checks, pay the mortgage, and other matters.
Retirement account beneficiary designations
Parents with children should review with their Florida lawyer what documents in addition to life insurance should have a specific beneficiary designations. IRAs and 401Ks, for example, should name the beneficiary (the other parent of the children normally). That way the funds can pass directly to the beneficiary without the need for probate.
It may be advisable for the parents to create a trust account for their children. There are several key benefits to a trust agreement
- The children get money for their needs usually on a monthly or regular basis. They do not get the money all at once.
- Children normally need an adult to handle their share of the money. The trust document appoints a trustee (a person or an entity such as a bank) to handle the trust for the child
- Trust agreements, if properly drawn can help minimize taxes and protect assets from creditors
Children with special physical or emotional needs such as autism may need a trust for the rest of their lives – not just until they reach the age of 18.
Parents with children should also provide for any guardian so the guardian has the funds to provide for the children they are raising in place of the parents.