Parents often go to great lengths for the comfort and safety of their children. In addition to meeting a child’s immediate needs, parents may also need to plan for their protection in the event of a sudden tragedy.
While parents generally expect to be present throughout the formative years and a child’s early adulthood, life is unpredictable. Car crashes, sudden medical emergencies and even criminal activity can leave children without their parents.
Establishing an estate plan allows a parent to provide for their children and ensure their safety when they cannot be present with them.
There are a number of important estate planning moves that parents may need to make for the benefit of their children, including the three outlined below.
Selecting an appropriate guardian
The best-case scenario when a parent dies is that the other parent survives. However, children are sometimes left without either parent. As such, selecting someone to act as a guardian is critical for the protection of the children. Parents need to consider factors including an individual’s health, availability and proximity when determining if they could act as a guardian. Choosing the right person and selecting alternate candidates can protect children should the worst come to pass.
Addressing financial liabilities
Children typically have strong inheritance rights when their parents pass. Unfortunately, certain financial obligations take priority over inheritance rights. Taxes, personal debts and even estate administration expenses can consume most of an individual’s resources, leaving their children with little or nothing. Testators with children often need to identify their financial obligations and ensure that they have life insurance or other resources earmarked to cover those costs to ensure their passing does not lead to financial devastation.
Protecting an inheritance
Children who directly inherit may not benefit from their inheritance. Minors usually do not have direct control over property or financial resources. Their surviving parent or guardian could potentially use most or all of their inheritance before they become adults and have the opportunity to choose how to use their inheritance. Parents hoping to help their children pay for college, afford a down payment on a home or start a small business may want to consider establishing a trust. Provided that the trustee is not the same person as the surviving parent or guardian, it is possible to preserve resources for the benefit of the children when they finally reach adulthood.
Parents may also need to plan for the possibility of incapacity to preserve resources for their families and limit the pressure that they experience in a challenging situation.
Children depend on their parents to provide for them, sometimes even after a parent dies. Creating or modifying an estate plan can be a smart move for new parents.
