There are many reasons for creating a trust. They are called children. An estimated 120 million Americans fail to create an estate plan to protect themselves and their families in the event of sickness, accident or untimely death. Parents should have estate plans that spell out who will take care of minor children and how any inheritance will be distributed to their children. This article gives three important reasons why parents should have an estate plan regardless of how small their estates might be.
Since the federal estate tax exemption is $5,250,000 for a single person and essentially $10,500,000 for a married couple, many people feel they do not need an estate plan. These figures eliminate many people, so they think they have no reason to plan. Such a thought is far from reality. Consider the scenarios mentioned below, which can happen to people of every financial situation in life.
- Name a legal guardian to take care of your minor children. This has nothing to do with money, but may be the most important reason why parents should have estate plans. Consider how carefully most parents evaluate caregivers for their children. Some parents do background checks on babysitters. Have you chosen an ultimate caregiver to take care of your children if you cannot? A last will and testament is the proper place to nominate a legal guardian for your minor children. You may love your sibling or cousin, but is this relative mature enough or available to take over parenting your children when you cannot? You may prefer to name someone as legal guardian who lives nearby, perhaps in the same school district, someone who already knows your children’s favorite snacks. Maybe you have already discussed this possibility with this person. However, without your legal direction, a court may name someone else as legal guardian of your children.
- Manage your children’s inheritance. With an estate plan, parents can keep their minor children’s inheritance in a trust fund until the heirs have learned to manage money wisely. Adult children can also benefit from having their inheritance managed in a trust fund. You may have college-age children who receive your financial help. Will they be able to handle receiving a large sum of money in a lump sum, say $100,000? Will the money be gone in less than a year? A living trust or a testamentary trust in a will can designate a trustee to manage the funds in trust until such time as you dictate, for when your children are old enough to receive their inheritance. Trusts are useful and flexible estate planning techniques. Maybe your child got married for the second time and you want to protect assets in case there is another divorce. An asset protection plan can be developed. Maybe a child is a big spender and you want to provide funds for a college degree, the purchase of a home or a nice wedding. A living trust can be developed for those items according to your wishes. An estate planning attorney can help you protect adult children from their spendthrift habits and creditors.
- Name beneficiaries. Do you have children from a first marriage? Do you consider step-children that you raised since they were young as your own? Have you legally adopted them? In a blended family situation, such as a second marriage with step-children, it is especially important to have estate planning strategies in place. Even when spouses tell each other they want to keep things separate so everything goes to their children, this may not happen without the help of an estate planning lawyer. When parents have estate plans, they can dictate who receives the inheritance, as discussed in depth in a prior blog.
Estate plans are not for the persons who sign the estate planning documents. Estate plans benefit the children and other loved ones that parents care about. Estate planning provides directions and simplifies matters for children and relatives. Most parents want to make life easier for their children. Parents can give their children peace of mind. Sounds like work, doesn’t it? Stross Law Firm now offers an estate planning maintenance program, Peace Of Mind A Life Plan for Everyone, so that you can rest assured that your children will be taken care of.
This article is not intended to provide legal advice or encourage anyone to do estate planning without the guidance of an estate planning attorney. Call us at 813-852-6500 to schedule a free 30-minute consultation with an estate planning lawyer.