Preparing a last will and testament isn't exactly fun for parents. It forces you to make serious decisions that aren't pleasant to talk about with your loved ones. A last will and testament can protect your assets, and ensure that your minor children receive your finances and belongings in the manner you want them to.
You should start by consulting with an estate planning attorney. Prepare for the meeting by asking yourself some hard questions, and gathering your applicable financial information.
Everyone Should Have a Will
Do you really need a will? Only 36 percent of parents with minor children have a last will and testament. While many people do not have substantial assets, if you do not have a plan in place, state laws step in to distribute the assets you do have.
This is called intestate and is best avoided by having a will if you have enough to leave for your children when you pass on.
Determine Who Will Care for Your Minor Children
It's difficult to think about your kids losing one of their parents. What would they do if they lost you both? When planning your last will and testament, you and your spouse need to choose a guardian to raise your children if something should happen to both of you at the same time.
The legal term for this is loco parentis, or "in the place of a parent." If you establish a guardian for your children in your will, that guardian will legally take responsibility for your children if something were to happen to you both.
Talk it over with the guardian you plan to appoint so it's not a surprise to them during probate. Think about naming a backup guardian just in case your primary choice changes their mind or becomes unable to care for your children.
Plan for Their Education
Your kids may be homeschooled or in private schools. You may want part of your estate to pay to continue their homeschooling or private school tuition.
Planning for your children's academic needs can also encompass their undergraduate education or vocational training. Part of your estate can be tucked away for their college tuition.
If you have enough to leave behind for your children's college education, consider establishing a trust or college savings for them that will ensure they don't decide to spend it on a sports car when they turn 18.
Create a Special Needs Trust
If you have special needs children, they have unique circumstances compared to others. If you pass away without establishing a Special Needs Trust, you could be jeopardizing their future government benefits and their ability to pay for medical care.
Any payment over $2,000 a month can make your special needs child ineligible for future supplemental security income (SSI) benefits. Your child may not qualify for possibly Medicaid under federal law 42 USC 1396p if they have too many resources or assets.
A letter of intent and advanced estate planning are the first steps to help ensure your child will be taken care of well into adulthood.
Consider the Ages of Your Children
A parent's life insurance policy may call for the money to be distributed equally among the kids. You may need to have it placed in a trust so it cannot be accessed and spent by a grieving spouse.
You have several options to choose from when you're preparing your will to cover your minor children. Minors cannot inherit property, so you may need to place the property in a trust as well.
You could try to establish a court-supervised conservatorship, in which the assets you leave are managed for the children until they reach the age of 18. If you are interested in a custodial account, you might try setting up a Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UGMA) account to help them with college.
Consider If Your Spouse or Partner Will Need to Work
An important discussion for stay-at-home parents and their working partners is the one that addresses how they and the children are going to be provided for.
If something happened to the working spouse, would the inheritance be divided so the at-home parent wouldn't have to work? For some families, it simply may not be possible for the stay-at-home parent to financially support the household without a job.
Purchasing a life insurance policy can help you continue life as normally as possible if one of you should pass away. When deciding how to divide assets, you and your spouse also need to discuss how much money the one left behind would need to sustain your lifestyle as it is today.
Continuously Update Your Will
If you already have a last will and testament, you should review it at least once a year. A good rule of thumb to follow is that a person's circumstances can change every three to six months, so your will may need to be updated to reflect the changes.
The birth of a new baby, a charitable cause that's touched you or a marital status change are all life occurrences that can affect your current will.