If you have young children, you'll want to take special care in your estate planning. Diligent planning now will ensure that your children are cared for personally and financially no matter what the future holds.
As you create your estate plans, make sure you consider the following:
Naming someone to care for your children
Your will should name a guardian to care for your minor children. And because children can't own property until they turn 18, your will may also name a conservator or trustee to manage the children's assets. One person can serve as both the personal guardian and the financial conservator, or those roles can be served by different people.
You should also name a backup guardian and conservator in your will in case your first choices are unable to carry out the obligation. Consider reviewing these choices annually, especially if personal and financial situations change for your family or your designated guardian or conservator.
How to distribute assets
If you've named someone as your beneficiary for your life insurance policy, retirement savings, bank accounts and other assets. You should then name your children as secondary beneficiaries in case you and your spouse pass away at the same time.
Your attorney can help you set up a trust to manage your children's assets until they're adults. A trust establishes a fund from which the children's financial conservator or trustee can draw money to cover their expenses. Children often gain control of the money in their trusts when they turn 18, but you can control the trust money however you wish.
For instance, you can give your child control of the money when he or she graduates from college, earns an advanced degree or reaches some other criteria or age. This is commonly known as an "incentive trust." If your child has a substance abuse issue, you can give him or her control of the money only if they meet certain sobriety criteria. This is commonly known as a "sobriety trust."
Children with special needs
A special needs trust can help you provide for a child with a disability throughout his or her lifetime. A special needs trust will help avoid compromising your child's Medicaid, Social Security and other governmental assistance. Be sure to consult a professional who has expertise with the complexities of special needs trusts.
Children from a previous marriage
If you have children from a previous marriage, you may wish for these children to inherit specific assets or percentages of assets — even if you're outlived by your current spouse. If you don't trust your former spouse to direct your children's inheritance appropriately, you may wish for their inheritance to be directed to a trust, even if your former spouse is still living. These specific desires should be outlined in your will with help from an experienced estate attorney.
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