What should you be considering in the wake of COVID-19?
Protecting your family is important, especially when you have minor children, and even more so now that we are living through a pandemic. With all of the unknowns of our current situation, you need some certainty. Having an up-to-date estate plan can be the first step toward providing that certainty in an uncertain world.
Many people view estate planning as limited to making arrangements for your death. However, it is equally important to plan for a time when you may still be alive but unable to care for yourself or your minor children. The inability to make decisions or care for oneself or a minor child is often referred to as incapacity.
Addressing the financial needs of you and your minor child
A revocable living trust can be a great solution for managing your and your minor child’s financial needs during incapacity. This planning tool enables you to name yourself as the trustee (the person or institution charged with managing, investing, and handing out the money and property) and allows you to continue exercising control over the money and property you transferred to the trust. The accounts and property are transferred to the trust when you change the legal ownership from you as an individual to you as the trustee of the trust. A trust also allows you to name a co-trustee or an alternate trustee to seamlessly step in, without court involvement, and manage the trust’s money and property for your benefit and the benefit of any other beneficiaries you have named in your trust if you become too ill to do it yourself.
In addition, when using a trust, you can specify when and how the funds should be used for your minor child’s benefit. You can provide instructions for certain expenses to be paid during a period of incapacity to ensure that your minor child is still being provided for in the same way you would provide for your child. Additionally, you can include a plan for how the money will be used upon your death. This can include your minor child receiving a specified percentage upon reaching a certain age (e.g., 50 percent at thirty years old and the remainder at fifty years old). You can also structure your child’s trust as an incentive trust to allow the trustee to give your child money only after your child meets certain goals (e.g., successfully completing a postsecondary education, being sober for one year, etc.). Alternatively, you can leave the decision of how and when to give out the funds exclusively up to the trustee’s discretion. This is sometimes referred to as a discretionary trust. Because your child will not be guaranteed a specific amount of money or piece of property, the funds will be better protected from any future creditors or a divorcing spouse that your child may have. However, when deciding to use a discretionary trust, it is important to choose your trustee wisely and provide clear guidelines for the trustee to consider.
Because you choose the trustee and determine how the money is to be managed and spent, you can rest assured that a former partner or less-than-desirable family members will not have the ability to spend your minor child’s money for their own benefit, even if one of these individuals ends up raising your minor child.
Lastly, an added benefit of utilizing a trust as part of your estate plan is avoiding the time-consuming and often expensive probate process that would otherwise be required. As long as you properly transfer your accounts and property to the trust, you will save your loved ones precious time and money during an emotional period.
Caring for your minor child
When planning for minor children, it is also important to consider who will physically care for them if you are unable to. If your minor child’s other legal parent is still alive and able to care for the child, the other parent will continue to provide care or will assume the day-to-day responsibilities of the caregiver. Nevertheless, it is a good idea to plan for what will happen if both of you are unable to care for the minor child, just in case. If you are the only living parent, or if the other legal parent is unfit to care for your child, however, it is crucial that you make the proper arrangements. While most people are familiar with the idea of naming a guardian for a minor child in a last will and testament, this document does not become effective until your death. Therefore, to properly plan for your minor child’s care during your incapacity, you need to consider naming a guardian in a separate writing that meets the requirements of your state law. We can discuss the current planning options available to you under our specific state law.
Even absent your incapacity, you can delegate your parental authority for a limited period of time (six months to one year depending upon state law) using a power of attorney for minor child (also known as a guardianship power of attorney, delegation of parental powers, or minor power of attorney). This can be helpful if you will be traveling for an extended period of time without your minor child or otherwise need to provide authority to another trusted adult to act on your child’s behalf.
Let us help you
Providing for your minor child’s care and financial security is an important undertaking with many important questions to consider. We are here to walk you through the process and help you answer those questions so that your minor child is cared for in the best way possible. Please give us a call today so we can begin your journey. We are available for in-person and virtual meetings.