How can my estate plan protect my children?
Planning an estate seems daunting for many individuals, and changes that occur on the journey though life, especially having children, can complicate the process. That being said, having children is even more of a reason to put an estate plan in place. If you are a new parent, there are some essential steps you should take in order to protect your family, including: preparing a will, buying life insurance, establishing powers of attorney, and designating beneficiaries of your retirement accounts. Let's take a brief look at each of these.
A Will
While many individuals are better served putting a trust in place as a means to protect their assets, having a will is necessary for naming a guardian of your children in the event both parents become incapacitated or pass away. Having a will is especially important if you are raising children without a partner. By failing to have a will, you leave open the possibility that the court will make decisions about guardianship you may not agree with. While writing a will is relatively easy and inexpensive, many people mistakenly believe a will can be created from forms on the internet. It is always best, however, to consult with a highly skilled estate planning attorney.
Life Insurance
Life insurance serves two purposes: to provide funds for the expenses of death (funeral and burial or cremation), and, more importantly, to replace an individual's earnings so that the surviving parent has sufficient resources to help support the family. There are different types of life insurance policies available, including term life, whole life and hybrid insurance.
Durable Powers of Attorney and a Living Will
It is essential for every adult to have durable powers of attorney for health care and finances of his or her partner. In a durable power of attorney (DPOA) for healthcare, a trusted person is given the authority to carry out the wishes in your advance directive, and to make other medical decisions if you are unable to do so. A durable power of attorney for finances gives someone, such as your spouse, authority over your assets. Moreover, a living will can set forth the end-of-life care you desire.
In the event your are seriously incapacitated, these documents clarify your wishes, relieving your family of the burden of making these decisions, minimizing the potential for disputes, and avoiding intervention by the court.
Designate Beneficiaries for Retirement Accounts
By naming a beneficiary for your retirement accounts, such as an IRA or a 401(k), the funds will go directly to the person(s) you select without going through probate.
Planning for Your Children
Many new parents mistakenly believe they have plenty of time to put an estate plan in place. But accidents happen, and not having a simple estate plan, starting with a will, can protect your family and ensure your wishes are carried out.