Parents want to protect their children and provide for them as much as possible. The chances are good that you’ve ensured that your children have the best standard of life possible right now. They are accustomed to this and probably think that it will continue.
Because you know what your children expect and what they’re used to, you need to ensure that your estate plan is set up to help this happen. How you set things up can have a big impact on how your children are raised if something happens to you.
Name the guardian
The person you choose to raise your children will have a significant impact on the lifestyle the live. Once you know whom you want to designate with this responsibility, you should set up a guardianship. Remember that this person is also taking on the financial aspects of raising your children, so you should set up provisions for them. This might be via trusts, payable on death designations and life insurance policies.
Set up the finances
Your estate plan can’t just turn over assets to a child who is a minor. Instead, you need to ensure that the things you’re passing along will be managed for the children until they can handle the duty themselves. One option for this is trusts.
When you set up trusts, you have to think about your specific situation. You may need to tailor the trust so that your children don’t automatically have the full benefits of the trust as soon as they turn 18. Instead, you can consider creating milestones for them to get the money. This might be based on age.
For example, you may consider giving 25% of the child’s portion of the assets to them at 18 and another 25% at 21 with a final disbursement at 30. This ensures that your children have the benefits of the trust without the ability to spend it all as soon as they reach adulthood.
If you have more than one child, consider setting up shares so that the trust is divided equitably. This can help to prevent other children from having to pay for what one child does. Additionally, you can consider setting things up as a lifetime trust so that it is protected from creditors and other legal action.
Planning for your children is a big undertaking. Be sure to discuss the situation with someone who is familiar with situations similar to yours so you can discuss your options and set the best plan to suit the circumstances.