Many young couples delay doing their estate planning, believing that it is something reserved for older or wealthier individuals. However, this common misconception can have disastrous consequences when one or both spouses die unexpectedly. In fact, the best time for a couple to do their estate planning is when they are young and of sound mind and body. Planning for the future is particularly important when there are young children involved.
While it may be the case that, as a young couple, you have relatively few assets, a good estate plan encompasses a lot more than just directing how your estate should be distributed after you die. A solid estate plan, at a minimum, should address these four things:
1. Nominate a guardian for minor children
If you have minor children, making sure that they are properly cared for in case you’re no longer around is likely a top priority. Nominating a guardian in your will is the best way to ensure that a responsible person will care for your children if you die unexpectedly. If you haven’t made your wishes clear in your will, the court would have to choose someone without any guidance from you. The common choice is usually a family member. But what if you really wouldn’t want certain family members to raise your children? Or what if you prefer that a close friend, who has a good relationship with your kids, be guardian instead? Unless you’ve planned ahead, the court would have no way of knowing your wishes.
When choosing the right person to act, some of the factors you may want to consider include:
Typically, it is best to nominate an individual who lives close to your children’s current home to avoid the possibility of having to uproot them. Studies have shown that children dealing with the unexpected loss of a parent fare best when they remain in a familiar environment surrounded by friends and family.
Religious and Political Beliefs
Because the guardian will essentially be stepping into your shoes, you likely will want to nominate someone who shares your same values and religious beliefs.
While it may be obvious, choosing a nominee that is financially stable and capable of supporting your children is critically important.
Willingness to Serve
Finally, before settling on a particular nominee, you should always speak with that person beforehand to make sure that they are willing and able to act as guardian.
2. Set out how your property should be managed until your children are older
If you’re like most parents, you probably want to exercise some degree of control over
when and how your children receive an inheritance. Without proper estate planning in
place, it is possible that your kids will receive an inheritance outright at age 18,
which is rarely a good idea. However, through the use of a living trust or testamentary trust, you can control when and how your children will receive an inheritance. You can even make distributions contingent upon your children reaching certain milestones, for example, when they attain a specific age, graduate from college, or get married.
3. Appoint a responsible person to manage the estate and/or trust
There are a number of matters that must be handled after you die, such as closing bank accounts, paying outstanding debts, and distributing assets to your surviving relatives or beneficiaries. All of your careful planning will be for not unless you appoint the right person or persons to tend to these tasks. Obviously, you will want to appoint someone who is responsible and trustworthy, such as a family member or close friend.
4. Designate someone to make financial and healthcare decisions for you when you are unable to do so
Proper estate planning should not only deal with what happens to your stuff after you die, but should also put in place a plan to take care of you if you become incapacitated while you’re still living. Through the use of a financial power of attorney and advance healthcare directive, you can designate a trusted individual to make financial and healthcare decisions on your behalf when you’re unable to do so for yourself. An advance healthcare directive also gives you the opportunity to give clear instructions with regard to your end of life wishes.
Although the tendency for many young couples may be to delay doing their estate planning until later on in life, the importance of planning as early as possible cannot be overstated.