Having children is one of life’s most significant events. Not only does it bring a complete lifestyle change, but it also brings a whole new outlook on life. Parents sometimes find themselves worrying about what will happen to their family if they were to pass away. Estate planning provides parents with the opportunity to establish contingency plans for their family should tragedy strike.
A last will and testament allows parents to name a guardian of the person as well as a guardian of the estate for their children. A guardian of the person will look after the physical well-being of children while a guardian of the estate will look after the finances of children should their parents pass away. Parents often name the same person to fill both roles but have the option to name two different respected and responsible adults to fill each role individually. Without a last will and testament, a probate court will do its best to name appropriate guardians.
Guardians no longer have control over the well-being or finances of children once children reach the age of eighteen. Any assets that children inherit will be under their complete control at age eighteen. Children could be responsible for a sizable amount of money if they received life insurance benefits or other assets from a parent’s estate. Some parents may be concerned that eighteen is too young to be responsible for significant financial assets. In those circumstances, parents can establish a trust to hold and distribute assets to their children as directed by the terms of the trust. The assets can transfer to the children outright at a time established by the trust such as when children reach a more mature stage in life.
Parents also have the opportunity to influence how their assets are transferred to children. Their first option is to allow assets to pass through the probate process, which ordinarily takes three to eighteen months depending on the amount of assets. Although lengthy and sometimes burdensome, the probate court supervision might be an attractive option for some parents.
Another option is for parents to transfer title of their property to a living trust while the parents are still living. Such a trust, which holds legal title to assets, allows parents to retain control and enjoyment of their property throughout their life. However, use and enjoyment of the assets pass to their children upon the parents’ death. The trust also names a responsible person to serve as trustee who will manage the trust assets and determine whether assets should be dispersed to children in accordance with trust terms. The trust can allow children to take complete ownership of trust assets at a specified point in their lives such as when they reach a specific age, finish college, or start a family or career.
Becoming a parent brings a whole new perspective on life. Enormous love and sense of responsibility for children can bring great concern. Establishing an estate plan that provides for the future needs of children can bring parents peace of mind in knowing their children will be cared for in accordance with parents’ standards and desires.