Your estate plan is a tool that you can use to help care for loved ones who are left behind when you pass away. For young parents, having this plan can provide for their children. There are many components that must be accounted for in order for it to be effective.
As you work to get everything set up, you need to find out how various aspects can help to protect your kids. Making sure you understand how all of these work together can ensure you have your wishes clearly outlined.
Will and trusts
Your will and trusts specify who is going to get what when you pass away. You can put some of your assets in trusts that the guardian over your children can use to pay for their needs. Some items might be passed along through the will, but many people prefer trusts because of the protections they offer. You can set conditions on trusts so they are only distributed when specific criteria are met.
You need to name guardians for your children. If you have more than one child, you can name different guardian for each or you can have one for all of them. Speak to the person you plan on naming to determine whether they can handle these duties. The commitment they are making is serious and long-term so they must be willing and able.
Payable on death accounts
Many financial accounts are governed by the payable on death designation. When you start the account, you fill out a form on which you name who will have control over it if you pass away. Some parents choose to pass these assets down to the guardian so they have access to the accounts to help the children. Anything with a payable on death designation shouldn't be included in the actual estate plan.
Powers of attorney designations
There are two areas that you need to think about when considering powers of attorney, which are the people who are going to make decisions and speak up on your behalf if you are incapacitated. You need someone to make medical decisions for you and someone to make financial decisions. This can be the same person or different people, so be sure you think carefully.
Estate plan components must be handled in the proper manner in order to be legally valid. Be sure that you are considering this as you create each one.