Let’s face it – no one – least of all parents of infants and toddlers, wants to think about death. But you are a responsible person. Before you filled out your registry, you researched the right crib, the contents you needed for your layette, which bottles are BPA-free and even filled out applications for preschool. Maybe you even got around to purchasing life insurance, but with that, you thought you were done.
But there’s more to protecting your family. On the off-chance that something catastrophic happens to both parents, what will become of your children? Who will be named guardian, how will they be appointed and will the transition at a traumatic time be smooth? Who will care for the money you left behind? How and when can your children access these funds? Leaving half a million bucks to the kids is not something to take lightly. With these weighty issues in mind, there are five major estate planning documents parents should have in place to protect both themselves and their kids.
1. Guardianship: Estate planners who deal with this issue regularly know that naming “back-up parents” in a will is just not enough. As parents, we are all terrified of the unthinkable situation where Mom and Dad perish in an accident. Documents to ensure that a “first responder” guardian is available are crucial so that kids are never in limbo and avoiding any chance the state authorities would take custody. However rare, this situation occurs, and it is completely avoidable. To squash this chance, a proper will must name guardians, but parents should nominate temporary and permanent guardians – in separate legal documents that are effective immediately when signed.
2. A Trust: Did your eyes just glaze over with this legal term? Usually a trust for parents with young kids simply means that if the parents are no longer around, the money left to care for the kids is kept somewhere and protected (think of it is a special “box”). A person of your choosing will manage it to benefit the kids; this avoids the undesirable situation where a large life insurance policy becomes payable to a minor and then can be accessed in full when your child turns 18! What would you have done with a pile of cash at that age? If you have kids, an experienced estate planner can offer various types of trusts to accomplish your goals.
3. Power of Attorney for financial purposes: This document allows you (the principal) to name someone to act for you (an agent). Few people ever sign one, but should you become incapacitated unexpectedly, this insures that someone is thinking about your best interests.
4. Health Care Power of Attorney: This is similar in concept to the financial POA but allows a trusted person to make medical decisions for you. Again, because you could become incapacitated anytime (whether for a few hours or many years), you must choose a trusted person to make the right medical decisions for you if you cannot.
5. Advance Directive/Living Will: The health care POA is usually accompanied by this document which addresses “end of life” issues. Think of it as your health care bill of rights. Most of us have an opinion about how we would want to be treated if we were clearly not going to survive an illness or accident, and without an agent to assert your wishes, a family can be but through great heartache in making such decisions.
There is a great deal more to estate planning than this list, but for most of us, these documents create a practical foundation for young parents. It’s never easy to deal with this weighty stuff but just think of the load off your shoulders when it’s all done – and done right!