According to a recent poll taken by the Virtual Attorney, 95% of adults under the age of 35 don’t have a Will. Moreover, 39% of men found them to be “not necessary” and 26% of women found them to be “too costly.”
This is a shame because not only can Wills actually be very affordable, they are extremely necessary regardless of age. For parents of young children, this is especially so.
Whether you’re anxiously awaiting the birth of your first child or you’re a seasoned parent expecting your fifth, if you don’t have a Will yet, it’s time to get one! Your Will can do so much more than simply deciding who gets your stuff when you die. Here are the most important reasons that any parent with a young child absolutely needs a Will.
If you pass away before your children reach adulthood, who will raise them? In most cases it will be your spouse. However, if you and your co-parent pass away at the same time in a terrible accident, what then? If you’re a single parent, then what happens? Obviously, these are not the kinds of questions that anyone wants to think about, but there are good reasons a responsible parent should. It’s always better to be prepared and to have a plan for the unexpected.
Perhaps the single most important feature of a Will for parents of young children is naming a guardian. Naming a guardian allows you to choose who will step in to protect the health and well-being of your child if the unthinkable ever does happen.
You probably don’t like the thought of leaving it to some judge to make decisions about who will raise your child but this is exactly what could happen if you were to die unexpectedly without having a Will in place.
The process of deciding who should raise your child is a difficult one, but the end result is the comfort and peace of mind that comes from knowing your child will be well cared for in the unlikely event that you were to die while your son or daughter is still young.
Oftentimes, parents will name a family member or friend to become the child’s guardian. It is important to consider more than your own personal relationship with that person. If this person already has children, how do they raise their own kids? Do they have similar beliefs and parenting style? Do they have the time and lifestyle to start raising a child, perhaps with little to no preparation? Do they have the financial means? It’s always a good idea to sit down and have this conversation with the person you are considering naming as your child’s guardian to make sure they are on board with the decision.
It’s also worth considering your child’s pre-existing relationship with the proposed guardian. Is the guardian someone they already know and trust or is it a distant relative? If a distant relative or friend is the best choice, it may be worthwhile to start fostering your child’s relationship with this person. This can help make an extraordinarily difficult transition just a little easier.
Finally, the proposed guardian’s financial situation should be considered. Even someone who is gainfully employed and good at managing their resources may not be prepared to raise an unexpected child. Fortunately, there are ways to not only compensate the guardian for their duties, but also to provide for your child over an extended period of time following your death.
Your Will allows you to do much more than simply deciding who gets your property; your Will allows you to control how your property is received. Failure to plan how your child will receive the inheritance can cause unintended and potentially disastrous results.
If you die without a plan, your child may take the inheritance through a custodial account. This is an account where someone will be appointed, a custodian, to manage your child’s inheritance until your child reaches a certain age, usually 21. Once your child turns 21, the custodian must transfer the inheritance to your son or daughter in one big lump sum. This means that your child, at the inexperienced age of 21, will receive the entire inheritance with no guidance or restrictions.
There are practical consequences to allowing an inheritance to pass this way. Maybe most importantly, this type of distribution provides no protection against your child squandering the inheritance, intentionally or otherwise. Assets held in a custodial account of this type may not be personally accessible to your child before they turn 21, but they do technically own the assets. This means that any money contained in an account of this type may be counted against your child when they apply for college financial aid. This could have serious consequences on their ability to receive the financial assistance they need.
A custodial account, though a valid means to hold your child’s inheritance, is best avoided in most situations. Through careful planning you can control how and when your child receives the inheritance. This can be done, for example, through the use of a trust. The trust becomes a legal vessel to hold funds until your child reaches a certain age, or it can be distributed in monthly payments or at certain times you would designate. The trust would also have a trustee in charge of the funds, someone you would designate, until your child comes of age.
In addition to choosing the trustee, when you set up a trust as part of your will, you can choose an alternate in case your first choice is unable or unwilling to serve. You can also define what sorts of things the trustee can spend money on for your child. Another benefit of a trust is that you can allow the child to receive the inheritance in small amounts instead of in one big sum. For example, you could decide that your child should receive 1/3 of the inheritance at age 21, 1/3 at age 25, and 1/3 at age 28. This type of plan can work well even if you have multiple children. Also, unlike the custodial account, the assets contained in the trust should not be counted against your child for the purposes of determining eligibility for financial aid. Even though your child is the beneficiary, they do not own the assets until the distribution is made.
As a parent, these are some of the most important benefits to setting up a life-plan, but they aren’t the only benefits. For more information, or for a list of our services and prices, check out our website at www.communitylegaladvisors.com.