Now You Should Actually Do It

By: Andrew Deaver

Putting together a will and other estate planning documents is often an unpleasant thought. In the back of most people's minds, they know they should put an estate plan in place, but they find reasons to put it off until later.

One life event that pushes a person to make a will is having a child. Upon having a child, parents need to decide who will take care of the child if both parents pass away and when and how the child should receive the assets the parents have worked so hard to accumulate, as well as the proceeds of any life insurance policies that the parents have.

These are two of many considerations an estate plan is designed to handle. First, parents can use their will to nominate someone to act as their child's guardian if both parents pass away. The guardian is the person who will likely take a younger child into their own home and raise the child as part of their family. If the child is older, the guardian will make appropriate living arrangements for them, whether that is with the guardian or another family member or friend. By nominating a guardian in their wills, the parents choose who will make decisions with respect to raising their child. If no guardian is nominated in the parents' wills, state law sets out a default list of the people who have priority to take care of the child. The default person is usually a close family member, but it may not be the family member the parents would have chosen.

Second, if both parents pass away while the child is still a minor, then the parents can use their wills to create a testamentary trust (or use a living trust) to hold the assets for the child in trust until the child reaches the age of majority or longer. While the assets are held in the trust, a person called a "trustee" manages the assets and distributes them for the child's benefit. By utilizing a trust, the parents get to choose who the trustee will be and when their child is entitled to receive large distributions. For example, the parents could choose that the child receives one-half of the assets when they turn 25 and the other half when they turn 30.

If there is no testamentary or living trust, the court becomes involved to transfer or administer the assets for the minor child. A custodian or conservator, who the parents did not get to choose, will manage the assets. When the child reaches the age of 19 they will receive their entire inheritance with no required supervision. If a conservator is appointed, the conservator will have annual, onerous reporting requirements to the court.

Talking with an experienced estate planning attorney can help you think through these considerations and help you protect your family and family assets. Now is the time when you should actually do it.