As any parent will know, finding spare time can be a hard task. Taking time to draw up an estate plan can often fall to the bottom of the priority list. However, it is important for all families to have a basic estate plan in place to provide financial security to protect children in the event of unforeseen circumstances.
Below are some key areas to consider when creating such an estate plan:
Appoint guardians for your children
This is imperative for parents with young children to consider when drawing up an estate plan. Choosing who will raise your children if both parents were to pass away is an important and difficult decision and one which should be made by the parents, rather than by the courts. Once decided, don’t forget to discuss your decision and ask the potential guardian if they would be willing.
You should also consider who is best to manage your children’s inheritance until they come of age. You could establish a trust for your children, which is an effective way of managing their money and can also reduce costs.
Draw up a will
The key function of a will is to plan out how your assets should be distributed when you die. It is a vital component of the estate planning process as it outlines your wishes and how your family will be taken care of.
A living will is another important document to have, as it gives details of your preferences for end of life medical care if you become incapacitated, rather than putting such responsibility upon your loved ones at a difficult time.
Decide upon an executor or trustee
When drawing up your will, you should detail the person who will be responsible for managing your estate when you pass away. The executor or trustee will carry out duties, such as finalizing your financial affairs, distributing your assets as per your will, and selling any properties.
Name your beneficiaries
Although your will is the most important document, you must also clearly specify who you want your assets to be left to in your life insurance and retirement accounts, as these documents take precedence over what is detailed in your will. If you want to leave assets to minor children, you should name the trust rather than the child directly.
Review your life insurance needs
Ensuring that your family has the means for a secure financial future after your death is a crucial part of estate planning. Put simply, you need life insurance if you have children who depend on you financially. Many parents find that term life insurance is surprisingly inexpensive if taken out early in life and that it can cover all sorts of costs, including funeral expenses, paying off debts, and general living expenses for your family.
Finally, you must remember to review your estate plan regularly so that it reflects your changing family and personal circumstances. Many financial advisors suggest one review per year, but if your family has a major change (such as a divorce) you should review and amend your plans immediately.