Every legal adult needs an estate plan, powers of attorney and HIPAA authorization at the very least, but the scope of planning may change considerably once you start a family.
Young people often avoid planning for death when building a family in preparation for life. But procrastinating about doing simple planning puts your assets and family into potential limbo.
To ensure your family is protected, take a few simple steps during this life stage.
What Should a Young Family’s Estate Plan Include?
We recommend that young families have a few key documents in their estate plans, including a simple Will, HIPAA authorization and Power of Attorney for health care and property (finances). In many cases, young families might consider setting up a revocable living Trust as well.
If you’re unsure where to start, this estate plan guide can help.
Here are five steps to help secure your young family’s future:
1. Select agents for powers of attorney for healthcare and property
A Will covers plans for your assets once you die and names a guardian for minor children, but what if you suddenly become incapacitated and unable to make decisions while you’re living? Designating Powers of Attorney to make financial and healthcare decisions on your behalf, should be your first step in estate planning.
Your Power of Attorney makes medical decisions for you and carries out other tasks.
The financial duties of a Power of Attorney for property include:
- Filing your taxes for you
- Paying your bills
- Contractual authority
- Making other financial decisions for you
While your spouse can often assume control over the property you own together, this is not the case for assets you own individually, and even your spouse cannot sell jointly held real estate without a power of attorney or court involvement.
2. Create plans for managing your property
Neither parents nor anyone else can leave property directly to minor children. If you have young children, your Will must designate someone to manage these assets until your children become adults. If not, a court will appoint a guardian to manage the property on behalf of the child, which is a costly option, requiring annual accountings and legal expenses.
You can also leave assets to your children through a Trust and appoint a trustee to manage the assets. The acting trustee is under a legal obligation to carry out your wishes for managing the assets to benefit the children. Once your children become adults, they can take possession of the assets from the Trust, but you can also opt to postpone their control or not give them control at all, depending on the Trust terms.
3. Grant guardianship for your children
You and your spouse are gearing up for your first vacation as first-time parents, and suddenly the thought sinks in: What happens to our child if we suffer a catastrophic event?
This question is inevitable for new parents. You might quarrel over whose parents would care for the children, and even talk to your loved ones about you wishes. Your and your spouse’s parents or siblings might have differing ideas about who is best suited to care for your children.
Without documenting your wishes in a formal estate plan, this question may lead to a court battle and even more painful transition for your kids.
Talk to your spouse about naming a guardian, and document those wishes in a Will. You can even ensure family members are excluded to protect an ill-fit family member from gaining any role in raising your child.
This simple act can save your family additional headache and heartache if the unexpected occurs.
When selecting a potential guardian, you may want to consider such factors as where your potential guardian lives, whether that person shares your values and is financially stable. It is important to discuss these matters with the guardian you name, to ensure an honest willingness to act with the capability you desire.
4. Distribute your personal possessions and other assets
Who will receive your personal items, investments and other assets when you die?
Without a Will giving direction, the court decides how your personal items will be distributed among battling beneficiaries. Rather than assume that your wishes will be honored, put them in writing, to avoid unfair results and perhaps a heated family dispute in probate court.
Many young families also assume their spouse will own their assets once they die.
But for married couples in Illinois, half of their property goes to the living spouse and half is split among their children. If your children are minors, the court would also need to appoint a guardian to manage their portion of the property, even if the guardian is, in fact, the surviving parent.
The financially fortunate few may also need to consider the tax implications of dying. For example, if your assets exceed the applicable exclusion amount (the amount you can leave to your heirs without incurring taxes), a married couple may want to establish Trusts to ameliorate or eliminate estate taxes in the long run, even after the surviving spouse’s death.
5. Designate an estate manager
When you die, someone will need to carry out financial tasks for you, such as closing your bank accounts, paying your bills and more. A Will names an executor to be your personal representative, taking responsibility for wrapping up your financial affairs. Many Wills include language making the administration of your estate independent of the court’s supervision and waiving surety bond requirements, thereby minimizing the cost of the probate.
If you die without naming an executor, the court will have to appoint your personal representative, known in Illinois as an administrator. Your court-appointed administrator may or may not be who you would have chosen. Also, the administrator will have to pay from the estate surety bond premiums, which can add significant cost to the probate process.
Starting a family is the perfect time to get your affairs in order and ensure your dependents are better cared for when you are no longer there to give love and protection.
For more than two decades, Matlin Law Group and its predecessor firm have provided estate planning services to many thousands of clients living in Chicago, Chicago’s North Shore, Northbrook and other surrounding suburbs. Through our compassionate estate planning approach, we take the time to understand your family dynamics and create estate plans custom-fit to your needs.
Our goal is to give you peace of mind, knowing that your affairs will be handled correctly in the event of a potential incapacity and certain death, either of which can happen in an unanticipated moment.Sign Up for Our Newsletter