9 Considerations for Estate Planning for Parents
Estate planning as a parent involves unique considerations to ensure the well-being and financial security of your children, especially if they are minors or have special needs. In this post, we share 9 considerations when estate planning for parents.
1. Guardianship for Minor Children
One of the most critical decisions for parents is naming a guardian in their will for their minor children in the event of both parents' death or incapacity. Choose someone who shares your values, has the ability to take on the responsibility, and is willing to serve in this role.
2. Financial Provisions for Children
Set up trusts or other mechanisms to manage any assets your children will inherit. Determine how and when the assets will be distributed (e.g., at a certain age or for specific purposes like education or health care).
3. Special Needs Planning
If you have a child with special needs, establish a special needs trust to ensure they receive financial support without jeopardizing their eligibility for government benefits like Medicaid or Supplemental Security Income.
4. Life Insurance
Consider obtaining or updating your life insurance policy to provide for your children’s needs in case of your untimely death. This can cover costs like living expenses, education, and other child-rearing costs.
5. Estate and Trust Management
Designate a trustworthy and competent executor and trustee who will manage your estate and any trusts you set up for your children. This person should be capable of handling financial matters and acting in the best interests of your children.
Managed Estate Planning for Parents
At DiversiFi, we offer Managed Estate Planning as an add-on to our Financial Planning service.
In partnership with EncoreEstate Plans, we will help you cross the finish line on your estate plan, serving as your liaison and accountability partner through the entire process. Estate planning is a crucial part of Financial Planning, and we want to make it easy for you! To learn more, schedule a free consultation with one of our Advisors.
6. Letter of Instruction
Write a letter of instruction to provide additional guidance about your children’s care and upbringing. While not legally binding, it can inform guardians about your parenting philosophies, educational preferences, and other personal wishes.
7. Education Funding
Consider setting up education funding mechanisms, such as 529 plans, to provide for your children’s future educational expenses.
8. Updating Beneficiary Designations
Ensure that your beneficiary designations on retirement accounts, insurance policies, and other financial accounts are updated to reflect your children’s needs.
9. Plan for Your Own Incapacity
Establish powers of attorney and health care directives that not only make your wishes clear in case of your incapacity but also ensure that your children’s care and financial needs continue to be met.
Regularly review and update your estate plan to reflect changes in your family situation, such as the birth of additional children, and financial circumstances. When estate planning for parents, it’s advisable to work with an estate planning attorney to ensure that all aspects of their plan are legally sound and effectively tailored to meet the needs of their family. This is particularly important for complex family situations or substantial estates.
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