As a qualified trust and estate practitioner, I've always approached estate planning from the careful, measured perspective of an expert outsider. But with the birth of my first child this past January, I've come to appreciate on a deeper level the anxieties that many parents face when preparing their Will and planning to leave a lasting legacy.
Preparing for death can be overwhelming for anyone. Nobody wants to consider a circumstance where they won't be here to care for their bundle of joy. Here are three key questions to consider that can help you put the right estate plan in place:
Who will be my child's guardian?
It's critical to plan who will take care of your child in case you and your partner pass away. In past generations, it was very common to appoint godparents to be guardians. However, this approach is less common among Gen Xers and Millennials who tend not to be as traditional or religious. With this change, choosing a guardian can often fall to the bottom of the to-do list.
There are a few factors to consider that might help to narrow down your choice: Is there a person who's parenting style closely mirrors your own? Who is most able to take on the emotional, financial and physical responsibility of caring for your child?
Even once you name your child's guardian, the process can be quite onerous should something happen to you. Many guardians don't realize that they must go to court and apply to become a legal guardian. Make sure to explain this to your chosen guardian to avoid potential conflicts or delays.
How much should my child inherit?
Unfortunately, there's no one-size-fits-all to leaving an inheritance. It's important to consider the options, so you can make an informed decision that will work for your children and considers their personalities, level of financial literacy and their spending habits. Do you leave a lump sum? Do you set up an incentive trust that provides a certain dollar value when your child achieves a milestone? Or perhaps a testamentary trust, where distributions are activated when your child hits a certain age?
When updating your Will as your children get older, be honest with yourself about your children's strengths, and consider letting them inherit in different ways depending on how you believe they will manage the money.
How do I prepare my child to properly handle an inheritance?
I'm a firm believer that financial literacy should be taught in great detail in schools, but until that happens, it's up to parents to teach their children about finances and the value of a dollar. It's easy to go through an inheritance, especially in an increasingly cashless world. Educating your children about finances, and walking them through your estate plan and any changes you make over time, can help them prepare and ensure their long-term financial planning.
Nobody can consider every possibility when planning your life. As a professional estate planner and a new mother, I'm more aware of this than anyone. Even the best-intentioned plans can change. That is why it's important to ensure that you have the right estate plan in place. Regardless of whether you have a newborn like me or a grown child, take the time to develop and review your Will, and discuss it with your children, so that it accurately reflects your situation and how you want to leave your legacy.
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