Estate planning when you have young children

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“Parenting: the days are long but the years are short.” — Anonymous

Far too many “younger” people (age 18 – 55) do not have any estate plan in place. Once children enter the picture, estate planning, like parenting, takes on a whole new level of importance and responsibility.

While many parents focus on things like saving for college, they neglect to plan on what will happen to their minor children (under the age of 18) if they should suddenly die. Rather than illustrate the many horror stories of not having an estate plan in that situation, let us focus on why it is vital to complete an estate plan when you have a minor child.

To Name Guardians for Your Minor Children. With a Will or Trust you control and designate who will care and be responsible for your minor children. Is there any more critical decision than who will care for your minor children and protect their assets in the event of a tragic accident or sudden illness? Even if you are divorced, you should still name a Guardian in the event the other biological parent dies and it becomes necessary for a Guardian to be appointed for your children.

Designate an Appropriate Age of Responsibility for your Child to Inherit. Generally, in New York, if you die without a Will, any minor, non-disabled children will inherit once they turn age 18, no matter how high the amount or the maturity/responsibility level of the children.

A great recipe for ensuring assets are all spent prior to age 19, is leaving it to a child at age 18. An inheritance between the ages of 18-24 may also disrupt college financial aid or, worse, distract a child from attending college if they ignorantly believe their newly found assets can sustain them.

With a Will or a Trust, you designate who will hold any assets in trust for them until they reach an age (generally 25) where they can responsibly handle such assets. I’ve found it very common for clients to choose 25 as the minimum age for their children to obtain assets outright, although I’ve also had people choose age 21 up through 40 years old.  

Generally Avoid Leaving Assets Directly to Minor Children: Unfortunately, many people rather than complete a Will or consult with an estate attorney, name their minor children as direct beneficiaries on their life insurance, IRAs and other retirement plans.

This is especially true for single parents. In this scenario, dying without a Will or Trust creates a host of issues and problems. Generally, if no Guardian or Trustee is in place via a Will or otherwise, upon your death, some adult will need to go through the court system and apply to be custodian/Trustee over such funds on behalf of the minor child.

If there is a hostile ex-spouse or other adverse family members, lack of planning could potentially put those assets under the control of a highly undesirable person. Also, as stated above, most beneficiary forms do not provide an option to set minimum ages for a child, resulting in many children inheriting at the very young age of 18.

With proper planning, a Trustee can be named in your Will or Trust and then that Trustee can be listed on all such policies as a beneficiary to hold monies on behalf of the minor child under the terms of your estate plan. Of course, you should consult with an estate attorney to ensure the proper language is used prior to filling out beneficiary forms.  

To name Guardians and Protect Assets of a Disabled Child. If you have a young child with a disability, the importance of a Will or Trust cannot be stressed enough. In this situation, a lawyer should draft language specifically addressing both the continued care of the disabled person and what happens to the assets they stand to inherit.

For example, in a Will or Trust you can direct assets to be held in a separate Special Needs Trust for the disabled child so as to not jeopardize or reduce any governmental or employment benefits he/she may be receiving. Without a Will, you lose that control which can disrupt or curtail such benefits and are leaving it to the courts to decide the care of the disabled child.

5. To Avoid Post-Death Court Battles after a Divorce or other Hostile Family Situation. There may be situations where a court (usually through a divorce decree) directs you to name an ex-spouse or other individual as a Trustee after your death in order to control any assets going to a minor child.

However, unless subject to such a court order, with a Will or Trust plan you designate who will be in charge of your assets to hold in trust on behalf of your minor child(ren). For many people it is easier to list those people they would never want to see in charge of their assets post-death, then to name those in control of them. The key is being proactive to avoid these unwanted events from ever occurring.

The harsh reality is no one can truly control when the unexpected might happen. What you can control is planning for the unexpected and working with an estate planning attorney to avoid the many negative consequences of dying with no plan in place. A proper estate plan will avoid or mitigate future legal expenses, will maximize your hard earned assets and keep them in the control of chosen loved ones and will bring peace of mind and certainty to an otherwise very stressful and chaotic situation.

James S. Rizzo is an attorney with the law firm of Hilton Estate & Elder Law, LLC, with offices in Rome, Utica, Boonville and Lowville. He has more than 22 years of legal experience and concentrates in Estate Planning matters, including Wills, Revocable and Irrevocable Trusts, Powers of Attorney, Health Care Proxies, Asset Protection, Nursing Home/Medicaid planning and related Litigation issues. He can be reached at 315-624-9600 or jsr@hiltonlawny.com for a free, confidential initial consultation. Visit us on the web at: www.hiltonlawny.com.

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