While every adult should have an estate plan in place, estate planning is particularly important for parents. The importance of an estate plan for parents does not evaporate when their children reach adulthood either. Given how crucial it is to have a comprehensive estate plan in place if you are a parent, the Grand Forks estate planning attorneys at German Law offer some estate planning tips for parents.
Why Should Every Parent Have an Estate Plan?
There are several reasons why every parent should have an estate plan in place, starting with the desire to provide for and protect children if something happens to the parent. In the absence of an estate plan, you have no way of knowing with certainty what will happen to the assets you intended to pass down to your children. You also cannot know who will end up managing those assets if your children are still young. Another important reason for a parent to have an estate plan in place is to decrease the likelihood of disputes that could lead to costly litigation following the parent’s death.
Estate Planning Tips for Parents with Young Children
- Nominate a Guardian in your Last Will and Testament. Your Will is the only official opportunity you have to let a judge know who you would want to be your children’s legal Guardian if one is ever needed.
- Establish a testamentary trust. A testamentary trust is created using a provision in your Will, meaning it only activates if you die. Think of a testamentary trust as a “worst case scenario” tool that ensures someone of your choosing will manage the inheritance you intend for your children but avoids the cost of administering a trust if one isn’t needed.
- Choose your Trustee wisely. Do not just appoint a spouse or family member without giving your choice some serious thought. Your Trustee should have some financial acumen and be able to understand the legalities of trust administration. Sometimes, a professional Trustee is the better choice.
- Make use of life insurance. You can make a trust the beneficiary of a life insurance policy, ensuring that the proceeds will be managed by someone of your choosing and used for the care and maintenance of your children.
- Include an incapacity plan. Your unexpected death is not the only thing you should plan for in your estate plan. Incapacity can also strike at any time. Consider including a revocable living trust so that control of your assets will automatically pass to someone of your choosing if you become incapacitated.
Estate Planning Tips for Parents with Adult Children
- Do not get stuck on the idea of an equal distribution. Parents frequently wrestle with how to distribute their estate assets because they feel compelled or pressured to distribute them equally among their adult children. If you have reason to not do so, do not get hung up on an imaginary requirement that prevents you from distributing your estate as you see fit.
- Use a trust to avoid a lumps sum distribution. If you are handing some significant and valuable assets to young adult children, or a beneficiary with a less than stellar record when it comes to making financial decisions, consider using a trust to stagger distributions instead of passing down a large lump sum.
- Use a Letter of Instructions to explain decisions. If you know or suspect that decisions within your estate plan will confuse or even anger your adult children, include a Letter of Instructions that explains the reasons for your decisions.
Are You Ready to Get Started on Your Estate Plan?
Please join us for an upcoming FREE seminar. If you are a parent and you are ready to get started on your estate plan, contact the Grand Forks estate planning attorneys at German Law by calling 701-738-0060 to schedule an appointment.
John grew up on a small livestock farm in west central Minnesota. He now lives in Grand Forks with his wife Maggie and their two daughters. In his free time John enjoys reading, taking his family to North Dakota and Minnesota state parks and rooting for all UND and Minnesota professional sports.
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