While it might not be the most comfortable topic to discuss, estate planning ensures your family’s well-being and provides peace of mind. This is especially important if you have minor children.
Here are the top estate planning action items for parents:
- Create a will: A will is the cornerstone of any estate plan. It allows you to specify how your assets will be distributed after your passing. It also enables parents to designate guardians for minor children. Without a will, the court may appoint guardians based on their judgment. Their choice may not align with your wishes.
- Create a trust: Setting up a trust can provide additional protection for your assets and control over how they are managed and distributed. Trusts can be especially beneficial if you have specific concerns, such as ensuring your children’s financial security or providing for a child with special needs.
- Designate beneficiaries: Make sure to designate beneficiaries for all your accounts and assets, including life insurance policies, retirement accounts and bank accounts. This ensures a smooth transfer of assets and avoids probate.
- Appoint powers of attorney: Select trusted individuals to act as your financial and healthcare powers of attorney. This is usually a spouse, but you may want to designate backup POAs. These individuals will make decisions on your behalf in case you become incapacitated. Be sure to discuss your preferences and values with your agents.
- Consider life insurance: Life insurance can provide financial security for your family in the event of your untimely death. Assess your family’s needs and determine the appropriate coverage to ensure your loved ones are financially supported in your absence.
- Plan for education expenses: If you have children, plan for their education expenses. Consider opening a 529 college savings plan, which offers tax benefits and helps you save specifically for educational costs. You can also include provisions for education in your will or trust.
- Address special needs planning: If you have a child with special needs, creating a special needs trust can help provide for your child’s unique needs while preserving their eligibility for government assistance programs.
- Update your plan regularly: Life is constantly changing, and your estate plan should reflect these changes. Review your plan regularly, especially after significant life events such as births, deaths, divorces or changes in financial circumstances. Ensure that beneficiary designations and asset titling remain up to date.
- Discuss your plan with extended family: Finally, ensure that your loved ones are aware of your wishes, where important documents are stored, and who to contact in case of emergencies.
When you’re ready to create or update your estate plan, reach out to Dworken & Bernstein.