Your estate plan gives you an opportunity to provide meaningful support for your children if anything were to happen to you. Your natural desire to take care of your children may be the best possible motivator to get you to create a comprehensive estate plan.
After all, you may not think too much about your financial legacy until you worry that your young children will not have the necessary resources to live a comfortable life if you die. Although many people choose either a will or a trust as the main instrument for their estate plans, many new parents will obtain the maximum amount of protection by including both a will and a trust in their estate plans.
Why would you include each of these documents in your estate plan?
A will lets you name a guardian
One of the most important steps in estate planning as a parent is choosing the guardian who will take over your responsibilities for the sake of your children. The guardian that you name will live with and provide for your children until they reach adulthood.
The ability to designate a guardian and even an alternate choice if your first is not available is why a will is so important for a parent trying to provide for their children.
A trust leaves resources for your child
A guardian would theoretically assume complete control over your child’s inheritance until they turn 18. It is possible for a guardian to dissipate or embezzle a child’s inheritance completely before they reach the age of 18. When you create a trust and name someone other than the guardian as trustee, you add an additional layer of protection ensuring that your child will have financial resources when they become adults.
The trust doesn’t need to be complex, nor do you need millions of dollars in assets to properly fund a trust for the benefit of your minor children. You could use the proceeds of a life insurance policy to fund your trust or make the trust the owner of your home so that the children won’t have to move if anything happens to you.
Thinking about your children’s potential future needs can help you create the right estate planning documents for your family’s situation.