Estate planners see the world through a different lens. When the news broke of the tragic death of a young and gifted Boston cardiac surgeon last week, my first reaction was sadness and sympathy for his family. My next thought was: “I hope he has a good estate plan.” What I meant was – Did he have a Will that nominated his wife as legal guardian and conservator of their minor children? Did he have life insurance that will provide his family with funds to continue to live the life they are accustomed to and to ensure his children can be educated? His wife, also a physician, may earn a good income, but will she be able to continue to work while raising four small children? Was planning done to shelter funds from estate tax? Were trusts put in place to manage assets for his children in the event their surviving parent dies unexpectedly?
These are admittedly unusual things to think about when hearing of a stranger’s death, but that’s where the estate planner’s mind goes. Over the years that I have been planning for families, I have seen the benefits of planning when the death of a young parent occurs. Because this is thankfully not a common occurrence, planning for the death of parents with young children may feel like a theoretical exercise. However, the impact of the failure to plan if death does occur at a young age, especially if young children are left behind, can be significant and long-lasting.
From a legal perspective, the two most important things an estate plan can do for a young family are:
- Establish Wills that name a guardian who will care for and make decisions for children until they turn 18, when they become adults in the eyes of the law. Creating a Will gives a parent the opportunity to choose a child’s guardian. Without a Will, family members, friends, or others who believe they should fill that role will apply for the position, and a judge will decide who the child’s guardian will be.
- Establish a Trust that will allow inherited assets to be managed and disbursed to children at appropriate ages. This ensures that a child will not have full control of an inheritance at age 18, and that funds will be available and can be used for college, the purchase of a first home, a wedding, graduate school, and other important purposes, rather than being spent in less appropriate ways. A trust can also protect assets from creditors, divorcing spouses and other liabilities common to young adults who may not be mature enough to handle money appropriately.
Read more about how an estate plan can benefit a young family in Five Planning Steps You Should Take for Your Children.
Hand in hand with legal planning is the financial planning that young families should do. An important component is making sure a parent has sufficient life insurance to replace the parent’s income so that the family’s lifestyle and ability to provide for their children’s future will not be compromised.
Things change quickly in a young family’s life. Estate planning can seem like a daunting task. I advise young families to plan for the present, and update their plan as their lives change and their children grow older. It is most important to create a plan that will protect your family now, should the unexpected happen.
Published February 2015