Estate plans sometimes include documents that discuss what happens after a medical emergency. However, their primary focus is often the protection of someone’s loved ones and the establishment of their legacy after they die.
When someone has young children, ensuring their protection may be the primary reason that an individual decides to create an estate plan. Children are entirely dependent on their caregivers and very vulnerable if their parents die. Therefore, parents often want to leave enough financial support to ensure their comfort during childhood and help them start off strong when they become adults.
There are multiple ways for someone to leave a meaningful legacy that will provide lasting support for their children after their passing. The following are some of the most important ways for people to provide for their minor children in the event of their premature death.
Managing their obligations
There will often be taxes and debts that an estate has to cover before any property will pass to someone’s children. Their credit card balances to their student loans. Those without enough liquid capital to cover those obligations may need to purchase life insurance so that debts won’t diminish what their children inherit.
Choosing a guardian carefully
A guardian often has control over inherited property until children become adults themselves. The wrong guardian might misappropriate inherited resources or simply mismanage them. Many children who receive a sizable inheritance have very little left when they reach adulthood. Choosing someone who is financially responsible and ethical to serve as a guardian for one’s minor children is very important when attempting to leave them a sizable legacy.
Placing major resources in a trust
A direct inheritance would not reach the children for years, and there is no way of knowing what a guardian or the other parent of the children may do with that inheritance in the meantime. Those who want to leave a nest egg to help their children pay for college, afford a wedding or fund the down payment on a home may choose to put certain resources into a trust for their children. Transferring the family home into a trust can also be a smart decision as it allows for the children to live there without putting the ownership of the property at risk. A trust can limit how people use inherited resources and ensure that some of them remain for the children when they become adults.
Thinking carefully about children’s needs and what legacy would be most meaningful can help parents put together an estate plan that provides them with lasting support. Seeking legal guidance is a good way to start.