Top 3 Reasons Every Parent of Minor Children Needs An Estate Plan
Top 3 Reasons Every Parent of Minor Children Needs An Estate Plan
An article written by Breanna Grove of Grove Legal Services and Tulsa Estate Planner
Do you really need an estate plan? If you have minor children, the answer is yes. Even if you don’t have a lot of assets, if you have minor children you at least need to have a will with guardianship provisions. However, to make sure that your children are provided for financially, it is best to have a Trust as well. In this article I will discuss the top 3 reasons every parent of minor children needs to have an estate plan.
1. To ensure that your children are taken care of by the person(s) of your choosing.
If something were to happen to you and your spouse and you do not have a plan, your children could be at risk of being temporarily placed in DHS custody until a suitable temporary guardian could be appointed by the Court. Then, your children would likely remain with the Court appointed temporary guardian until a permanent guardian could be appointed. If guardianship is contested this could be a lengthy process and your children could remain unsettled for quite some time.
If you have a will with guardianship provisions you can chose who will be the guardian(s) of your children if something happens to both you and your spouse. The children would immediately be placed with their guardian(s) and you would avoid the traumatic experience of their being placed with strangers or being shuffled around after such a tragic event.
2. To know that your children’s financial needs will be met.
If you don’t have a Trust, your assets will have to be probated by the Court. Probate is a timely and costly endeavor and your assets could be tied up between 6 months to 2 years. If you have a Trust your assets will immediately be available for your Trustee to use to provide for the needs of your children.
Additionally, minors cannot be listed as beneficiaries of life insurance policies and cannot receive an inheritance. With respect to a life insurance policy, do you trust that the beneficiary you listed would provide for your children? Even if you are confident that your listed beneficiary would provide for your children, there would likely be negative tax consequences on that individual for receiving the proceeds of your life insurance. With a Trust in place, the life insurance money can be held in the Trust for the minor beneficiary and can be used to provide for their care.
With respect to your other assets, if there is not a Trust in place, the probate Court would require the money be placed in Trust for the benefit of the children. When your children turn 18, they would be entitled to the entire sum of money which is discussed further below under reason number 3. In the event that your children need money for health, education, etc. the Court would have to be petitioned and the Judge would determine if those needs should be met. However, if you have a Trust your Trustee can decide whether or not to use any Trust assets to provide for all of your children’s needs without having to involve the Courts. The Trustee has much more flexibility and can provide for needs such as a vehicle or discretionary items that a Court may not approve.
3. To protect your children’s inheritance.
A large majority of my clients do not want their 18 year old to receive their entire inheritance, especially an 18 year old who no longer has parents to help them out financially. If you have a Trust you can provide provisions that stagger the payments to minor beneficiaries over a number of years and allow portions of the inheritance to be paid out after particular milestones such as graduation from college. Additional protections can also be included wherein the Trustee has discretion to make the payments in the event your child is involved in a lawsuit, divorce, or has some other life event occurring wherein it is not a good idea for that individual to receive a portion of their inheritance.