The birth of a child changes everything. You’ll notice that now that you are a parent, you will find yourself worrying about your child’s present and future wellbeing. The future is uncertain, so how can you ensure your child’s safety and financial security in the future? What will happen to them if you pass away? An estate planning tool can help you determine those things and many more. There are different tools with which you can determine your wishes. The right one for you will depend on what you want.
Advantages of estate planning
Estate planning is an important and necessary process to protect the interests of your family in the future. The most common estate planning tools are trusts, wills and powers of attorney. Each offers you the possibility to plan ahead and save your family from uncertainty if something happens to you. There are different ways in which an estate planning tool can help you:
· To appoint a guardian for your child
In a will, you can state who will take care of your child if you and your spouse pass away. If you don’t choose a guardian for your child, the state will do it for you, and they could send your child to a family member you don’t like. Ultimately, your child could go to the foster care system if no one wants to take care of them.
· To designate your child as an heir or beneficiary
By creating an estate plan, you can determine how you want your assets to be disposed of when you pass away. You can transfer property to your chosen heirs or beneficiaries through a will or a trust. Those estate planning tools are different, but both of them allow you to determine who gets what upon your death, including your children, spouse and other family members.
· To decide who will distribute your assets
Wills and trusts allow you to determine who will manage your estate when you are gone. Your trustee or executor will be the person who will pay off your debts and estate taxes and distribute your estate to your heirs or beneficiaries after your death. By appointing someone that you trust, you can ensure your child gets their lawful share of your estate.
· To determine who will handle your money
Your trustee or executor can also take care of your child’s share of the estate if you die before they turn 18. Underage beneficiaries cannot inherit property in their name until they are of age. If you don’t want your child to receive all of that money when they turn 18, you can use a trust to order the distribution of your assets in chunks over the years. For example, they could get 20% of their inheritance when they turn 21 and then another 20% five years later and so on.
· To create a durable power of attorney
A durable power of attorney is a legal document that allows you to specify who will make decisions on your behalf if you become incapacitated by a disability or disease. By creating a durable power of attorney, you can choose who you want to make your health care and financial decisions. That way, you can save your children from making hard decisions if something happens to you; decisions they may not be able to make objectively—for example, the decision to suspend treatment if you are very ill.
If you decide to set up a trust, will or power of attorney, you must update them from time to time because your circumstances can change. And so can the law. Because of this, you must review your estate plan every five years.
Protection for your family
No one likes to think about death or the possibility of acquiring a disabling condition in the future. However, now that you are a parent, you must think about your kids. By estate planning, not only will you get a sense of security, but you also can ensure your children are well off when the inevitable happens.