Estate planning is important for every adult, but it becomes essential for parents with young children. A well-drafted estate plan protects your children if anything happens to you. Collaborating with an experienced estate planning attorney is the best way to create or update your plan to provide for your children in your absence.
To help you start, our North Carolina estate planning attorneys at created a list of the top 10 estate planning tips for parents with young children. If you have additional questions or concerns, please feel free to contact our office to schedule an appointment.
- Execute a Last Will and Testament
A Last Will and Testament is often the cornerstone of an estate plan for parents. A Will ensures that your assets are distributed according to your wishes. It designates who will administer your estate after you pass away. Without at least a basic Will, the State of North Carolina will create an estate plan for you using intestate succession rules. The court process is lengthy, expensive, and does not guarantee that your wishes are taken into consideration. - Designate a Guardian
The moment you knew you were going to be a parent is likely the moment you started worrying about what would happen to your children if something happened to you – and you have not stopped worrying since. One of the most crucial steps you can take in estate planning as a parent is to designate a guardian for your young children. A guardian is someone who will take care of your children if you pass away and the other parent is unable or unwilling to care for your children. Choose someone you trust and who shares your values. - Rely on a Trust to Protect Assets Meant for your Children
We don’t recommend that you leave assets to your minor child in your Will. This is because the law prohibits a minor child from inheriting directly. Creating a trust, however, can be an effective way to manage and protect assets earmarked for your minor children. A trust allows you to specify how and when your children will receive their inheritance. It also lets you stagger the inheritance you leave so that your young adult child doesn’t have to manage a lump sum inheritance. Best of all, you choose the Trustee when you create a trust. The Trustee is responsible for protecting and managing the assets held in the trust until your child is old enough to manage them. - Use Life Insurance Effectively
Life insurance can be a vital component of an estate plan for parents with young children. A life insurance policy can provide financial support for your children’s upbringing and education if you pass away. Work with a financial advisor to determine the appropriate coverage amount. You should take into consideration things such as your current and future financial obligations. These might include mortgage payments, college tuition, and daily living expenses. Talk to your estate planning attorney about specialized trusts that can provide additional benefits. Two common specialized trusts are a special needs trust and an Irrevocable Life Insurance Trust (ILIT). - Make Use of Beneficiary Designations
Certain assets, like life insurance policies, retirement accounts, and bank accounts, can pass outside of probate and be immediately accessible. Ensure your beneficiary designations align with your intentions. Instead of naming minor children directly as beneficiaries, consider naming the trust you created for them. This allows your assets to be under the control of a trustee who you choose instead of under the guardianship of the court, which can be cumbersome and expensive. - Create a Durable Power of Attorney
With a Durable Power of Attorney (POA) you appoint someone to manage your financial affairs if you become incapacitated. Having a durable POA in place prevents the need for court intervention and provides financial security for your children. - Execute Advance Directives
Advance directives, including a Living Will and a Healthcare Power of Attorney, protect you by ensuring others honor your medical preferences if you cannot make decisions yourself. A Living Will outlines your medical preferences while a healthcare POA designates someone to make medical decisions on your behalf. These advance directives protect you and reduce stress on your family. - Plan for Your Children’s Education
No matter how young your children are, you are probably already planning for their higher education. By setting up a 529 plan or other educational savings account, you can help secure your children’s educational future by making sure that the necessary financial resources are available when the time comes. Not only do these accounts help you save money earmarked for college expenses, but they can also offer important tax advantages. - Keep Your Estate Plan Documents Accessible
Creating your estate plan is one of the most valuable gifts you will ever give to your children. Keep your estate planning documents organized and accessible. Inform your Executor, Trustee, Agents, and key family members where your estate planning documents are stored and provide them with contact information for your estate planning attorney. - Don’t Forget to Review and Revise Your Estate Plan
Estate planning is not something you ever truly “finish.” You should routinely review your plan to ensure that it reflects your current wishes. In addition, life changes should trigger an immediate update to your plan. These can include the birth of additional children, changes in financial status, or relocation.
Contact Us
At Clarity Legal Group, our North Carolina estate planning attorneys are dedicated to helping you with all your estate planning needs, both now and in the future. Reach out to our team today by calling 919-484-0012 or contact us online.
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