New parents are among those who may feel strongly compelled to obtain the protections of an estate plan. They worry about what kind of future their children might face if they experience some kind of emergency or die while their children are young.
While every estate plan is unique, certain needs tend to apply to most people in specific circumstances. Parents who already have basic documents in place and those ready to plan for the protection of their children generally need to ensure that they address all three of the important considerations briefly explained below.
1. Selecting an appropriate guardian
Parents creating an estate plan may hope that their children could live with a surviving parent if anything happens to them while the children are still young. However, an incident that claims the life of one parent could potentially affect both of them simultaneously.
In such cases, a guardian is critical for the protection of the children. A guardian serves a similar role to that of a parent. Carefully selecting a few candidates and discussing the possibility of guardianship with each of them can help parents choose the best person for this critical role.
2. Addressing financial obligations
Young families may seemingly have many of the same resources as more established households. The parents may have vehicles and might have already purchased a family home. Those assets may represent more debt than equity early in the family’s existence.
As such, parents may need to review what resources they have on hand to cover their financial obligations in the event of their premature passing. Many parents carry enough life insurance to pay off all of their major debts, including mortgages and student loans. Other times, special insurance policies that pay specific debts in the event of the policyholder’s death could be an option.
3. Preserving an inheritance
Children are often the main beneficiaries of a parent’s estate. However, if the children are still minors when a parent dies, they may not be able to directly control their inheritance. Their surviving parent or guardian could have control over their inheritance unless the parents try to preserve it. Funding a trust is a common strategy to protect resources intended for minor children.
Parents with young families often need help addressing the basics of estate planning, and that’s okay. Establishing clear goals can help parents take appropriate steps for the protection of their children.