An estate plan is kind of like an insurance policy – it kicks in when things get complicated. You don’t want to have to use it, but without it, a bad situation is made exceptionally worse. The plan sets out your wishes, clearly and concisely, so that no matter what happens, your loved-ones won’t be playing any guessing-games.
If you’re a parent, estate planning is absolutely essential.
Unlike estate planning for retirees, planning now isn't so much about how to dispose of your assets. It's about who should step in and care for your children if you can't.
Recently, USA Today reported on a study conducted by Caring.com, which revealed that 64% of parents with minor children had no estate plan in place. Chances are, most parents have talked with a loved-one or close friend about taking care of their child (or children) in the event something happens. While that’s a good start, it should only be the beginning. Otherwise, you’re taking a huge risk.
For example, consider this hypothetical: Mom and Dad ask Aunt to be the guardian of their six-year-old Child if they pass away. Other than talking to Aunt, Mom and Dad have no other formal documentation about custody of Child. One week later, Mom and Dad are fatally injured in a car accident. Based on her conversation with Mom and Dad, Aunt would likely step forward to take care of Child. However, before things could be made official, a judge would have to enter an order making Aunt the legal guardian, which means lawyers, legal fees and courtrooms will be involved to determine permanent custody. And that’s if everything goes well.
What if someone objects to Aunt being the guardian of Child? Say, for example, that In-Laws think that Aunt is unfit to raise Child and they would be better guardians. Or maybe they simply (and honestly) can’t believe that Mom and Dad would have chosen Aunt over them. In that circumstance, the determination of guardianship breaks down into a he-said/she-said scenario and the judge will end up making the ultimate decision based whatever evidence may be available.
Unfortunately, the judge's ruling may not be what Mom and Dad would have wanted.
Let’s consider something else. Let’s say that only Dad passed away in the car accident. Let’s say that Mom survived but was in a coma and incapacitated. Again, based on the conversation between Mom and Dad and Aunt, it seems reasonable to think that Aunt would step forward to take care Child. However, even if no one else in the family objects, will Aunt have the authority to get copies of Child’s pediatric records if necessary? Can she enroll Child in school? Can she take Child out of state? When can she be awarded full custody of Child if Mom is in a coma for years?
An estate plan allows you the chance to make sure that your children are cared-for, no matter what happens. You can spell out exactly who has custody and under what circumstances. Most importantly, the plan protects your kids from the agony of custody battles.
Imagine the trauma of being a small child, dealing with the loss of a parent, or both parents, and having to sit in a courtroom while lawyers argue about who will be the new parents.
So, practically speaking, how can you plan for your kids’ futures? The two most common methods are through either a will or a trust. A will is a document that lays out your final wishes, such as who gets money, heirlooms and other property. It can also name guardians for minor children. However, before anything can be distributed, the will must be submitted to the probate division of the circuit court, a personal representative must be appointed and a probate judge will oversee notification of all creditors and interested parties under the will. The probate process is all public record, it generally requires the use of attorneys and, in Missouri, will likely take no less than six months.
A trust, on the other hand, is a relatively new way to plan for the future. It spells out the rules that you want followed for property held in trust for your beneficiaries. One of the most popular advantages of a trust is that it allows you to avoid probate. During your life, you wear three different hats in relationship to the trust: you are the person that creates it (the Grantor); the person that manages it (the Trustee) and you get to use and benefit from everything in it (the Beneficiary). During your life, you have complete control over the trust. Once you pass, the trust becomes irrevocable and everything kicks in immediately, thereby avoiding probate. Whomever you’ve named as your successor trustee will be legally responsible to see that all of your wishes are carried out.
Keep in mind that wills and trusts are not completely ironclad. Disputes and delays may still arise even with the best-laid estate plans. But chances are significantly greater that your wishes will be carried out if you have one of these plans in place. To raise minor children without an estate plan puts their futures at risk. It's worth taking the time now to give yourself, and your children, peace of mind.
If you have any questions about wills, trusts or other estate planning matters,
please contact us today.