Like a new year, parenthood brings with it many new experiences. Some are great — the first time you hold your child, the first time they smile, et cetera. Some are not — first diaper changes, the first all-nighter, and so on. The Arnerich Massena team is welcoming three babies in the coming months and we love hearing stories about these firsts from our new parents.
Sometime during those first few sleep-deprived months, most new parents stumble across the same thought: “Since I am now responsible for this other human being, I should probably get my finances and estate in order.” For some, that estate may mean nothing more than student debt and a savings account. For others, there may be millions of dollars that could potentially fall into the lap of your child. In either case, having a plan can create peace of mind that your child is protected in case something happens to you. Addressing four key issues will help you be prepared as you work with your attorney to create your first estate plan.
(Please remember along the way that the odds are overwhelmingly in your favor that you’ll live to see your kids grow up!)
- Someone will need to have physical custody of children.
This person does NOT need to be the same person who has control of the finances. Talk with friends and family about who this person (or people) will be before meeting with your attorney, as they may be identified in your estate documents. Also think through the different aspects of your children moving in with guardians, including: where do you want your children to live? Would you like to provide guardians with financial assistance to move or renovate their home? Who ought to serve as guardian if your primary guardian cannot serve?
- Someone will need to hold the purse strings.
This individual (or corporation) will be the one managing and investing funds held on your children’s behalf. He or she will choose the investment strategy, file appropriate tax returns, and decide how funds are to be disbursed. They may also have to say “no” when children ask for distributions outside the lines you have drawn in the trust. Identifying this person/people ahead of time will save you time, and some money, with your lawyer.
- Parents have a lot of freedom as to how funds are spent on kids after the parents are gone.
Trusts offer a wide range of options to protect your children as they grow and mature. There are all sorts of ways you may protect trust beneficiaries along the way. These protections look to shield assets from children’s unwise spending, creditors, future ex-spouses, substance abuse problems, and/or professional malpractice claims, among others. Think about how you want to have money spent for and by your children, and what sorts of things you’d like to be protected against, then talk with your attorney about how that can be incorporated into your estate plan.
- Titling is critically important.
IRA/401(k) assets, real estate, and bank accounts all pass to heirs in very different ways. Your attorney will be able to make the best use of your time if you present him or her with a net worth statement that outlines what assets are worth and how they are held. Jointly held assets and beneficiary-designated assets (like 401(k)s and IRAs) often pass entirely outside of a decedent’s Last Will or Trust. Your attorney should be able to design a plan that incorporates all of these assets and ownership types.
This sort of planning is often straightforward, but the details are critical and mistakes can get expensive. At Arnerich Massena, we recommend that all of our clients seek the assistance of an attorney who specializes in estate planning. We are happy to coordinate with these attorneys to make the process as efficient and effective as possible for our clients.