5 Questions Parents Need to Answer for Estate Planning
May 9, 2018
You’re young, got a great job and a couple of really awesome kids – life is pretty good, right? And when life is good, thinking about what happens when you pass away probably isn’t at the top of your priority list. But sometimes, life throws us a curveball. And while taking control of your family’s finances is an important step, all families, including yours, should have a basic estate plan in place.
While having a will is arguably one of the most important things you can do for yourself and your family, according to a recent survey, more than half of us don’t have a will. Even more alarming is the same study shows only 36% of parents with children under the age of 18 have an end-of-life plan in place.
Creating an estate plan isn’t expensive and doesn’t have to be complicated. While the laws vary from state to state, here are five questions to ask yourself when creating an estate plan for your family.
Do I have enough life insurance?
You might have a life insurance policy through your employer, but what happens if you leave your job? Medical problems are never planned and you might suddenly find yourself with uncontrolled diabetes or a rare blood disease that prevents you from qualifying for life insurance later. Even though you might be healthy now, if you ever switch jobs and have to reapply for life insurance, it might be too late.
Having life insurance is a crucial part of estate planning. Contact a trusted provider and make sure you have enough to cover any debts and funeral costs, and consider future large costs like college, too.
Who will care for your children?
As a parent, if you haven’t put in writing who will take care of your kids if both you and the other parent pass away, you need to do it now. As a parent, naming a guardian for your child (or children) is the number one reason why you need an estate plan. If you don’t have a will that names a guardian for your children, the court will appoint one.
And if you leave it to the court, they generally appoint a family member or other capable friend, but who? Do yourself a favor and make the decision yourself instead of letting the courts decide for you. And once you decide, make sure you ask the potential guardian if they’re willing to take on the role!
Do I need a will?
Everyone needs a will, whether you have children or not. If you don’t have a will, your family might not get the assets you want to leave them after you pass away. As a legally-binding document, a will provides an outline of exactly how you’d like your property distributed. Without one, the court will decide for you according to the state laws and you might not like it.
Contrary to common belief, whether you have a will or not, all estates must go through the probate process. Having a will speeds this up because it tells the court how you’d like your estate divided. It also helps to minimize any family fights about your assets because it clearly spells out the “who, what and when” of your estate.
Who are my beneficiaries?
When it comes to certain types of assets, like life insurance, IRAs, and 401(k)s, you can name a specific beneficiary and that will take precedence over what’s listed in a will. When you name a beneficiary for these types of assets, it bypasses the probate process altogether.
It’s important to know that children can’t directly own any property until they reach the age of majority. In this instance, you’ll want to name a trust that will hold the assets for them until they’re older. If they might inherit a large amount of money, consider using the trust to set up periodic payments over the course of their life rather than one lump sum when they turn 18.
What if something changes?
Even though a will is a legally-binding document, it can be changed at any time while you’re still alive. Life can change at lightning speed — you might have more children, get divorced, get married, or the person you named as guardian might pass away. And because time gets away from us, you’ll want to check in on your will (and double check your beneficiaries) once a year to make sure the choices you made then are the same ones you’d make now.
If you don’t have a will or an estate plan in place already, don’t wait to get it done. Tomorrow is not promised and when someone you love dies, it’s an overwhelming experience. To make it easier on families during this already emotional time, you’ll want to consider these five questions and determine if it would be wise to meet with an estate planning attorney to help you. Knowing and understanding your state’s laws is key, but sometimes it’s best to leave estate planning to an expert who can turn your wishes into a legal document.
About the Author: Amy Beardsley is a
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Kevin Payne is the co-founder and budgeting and family travel enthusiast behind FamilyMoneyAdventure.com.
Kevin is a freelance writer specializing in personal finance and travel. He is a regular contributor to Forbes Advisor, Credit Karma, Fox Business, Credible, CreditCards.com, and Student Loan Planner.