Inheritance planning is something that every adult should think about and discuss with an experienced estate planning attorney. For the parents of minor children, however, inheritance planning takes on a heightened importance for several reasons. Although no parent wants to dwell on the possibility that something could take them away from their children, the reality is that death or incapacity could do just that at any time and without warning. If you have minor children, and you have yet to focus on inheritance planning, now is the time to gets started.
What Is Inheritance Planning?
The term “inheritance planning” is basically synonymous with the term “estate planning” and, at its most basic, refers to the process of anticipating and planning for the management and disposal of your estate during your lifetime and/or and after your death, while minimizing various taxes. A comprehensive estate or inheritance plan, however, will also include additional components that address things such as the possibility of your own incapacity, long-term care planning, and probate avoidance.
Why Is Inheritance Planning Important for Parents with Minor Children?
Contrary to what many people believe, it is not necessary to reach a specific age or point in your life nor to have amassed a small fortune before inheritance planning becomes necessary. If you are the parent of minor children, your children alone should provide more than enough motivation and incentive to get started on a plan.
As a parent, you undoubtedly worry about what would happen to your children if something happened to you that prevented you from caring for them, such as your own incapacity or even death. Planning ahead for that possibility is crucial for several reasons. Primary among those reasons is the fact that your minor children cannot inherit directly from your estate, which makes ensuring that they are financially secure in your absence more complicated. Because they cannot inherit directly, you will need to arrange another route for their inheritance to take. For most parents, creating a trust is the solution. A trust allows you to appoint a Trustee to manage and protect the assets you leave behind for your children. The trust terms can be used to decide how those assets are used while your children are minors and how and when the remaining assets are disbursed to them when they reach the age of majority. You also have the ability to direct the proceeds of a life insurance policy into the trust. This is important because both life insurance proceeds and trust assets are non-probate assets, meaning they will be available to provide for your children immediately after your death instead of at the end of the often lengthy probate process. Finally, even if you choose to use a trust agreement as your primary estate planning document, you will still want to execute a Last Will and Testament because your Will is the only official opportunity you have to nominate a Guardian for your minor children in the event one should ever be needed.
Your death is not the only outcome that needs to be considered. You should also plan for the possibility of your own incapacity within your inheritance plan. If a tragic accident left you incapacitated tomorrow, what would happen to your children? Who would have the authority to use your assets for their support? Including an incapacity planning component in your overall plan will answer these questions now so that your loved ones are not forced to litigate the issues in the future.
A well thought out inheritance plan will grow with you and your family. As your assets increase in value, and your children near the age of majority, you will definitely want to review your inheritance plan though to ensure that the provisions of the plan continue to reflect your wishes.
Contact an Inheritance Planning Attorney
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns regarding inheritance planning for parents with minor children, or you are ready to get started on your plan, contact an experienced inheritance planning attorney at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.