Many couples with young children or those without children yet do not think estate planning is for them. Estate planning is often associated with old people or those with large estates. However, estate planning is important for young families just as it is for older people and those with lots of assets. Unfortunately, even a young adult can face an untimely death or disability. Planning for that possibility, although not a pretty or fun thought, is both prudent and responsible.
Estate planning for a young family is not expensive and offers many benefits if a death or illness occurs. In addition to an estate plan, a young couple should look into insurance needs — life insurance, long term care insurance, and disability insurance.
Here are some of the essential parts of an estate for a young couple:
Who will handle my estate?
An executor handles an estate after someone dies. If you decide you need a revocable living trust, a trustee does something similar after you die. In both examples, the executor or trustee handle the financial affairs of the estate until it closes, including finding assets, paying bills, and finally distributing assets. Although for most couples, the executor is the spouse of the deceased there may be reasons you want someone else. In any event, it is always good to have a backup, known as a successor if the original executor or trustee cannot serve.
Who will be the guardian to my children?
The naming of a guardian is perhaps the most important reason for a young couple with few assets to have a will. Without a will, the court will appoint a guardian which can lead to ugly family battles to decide who will care for your children. It is important to name a guardian. A revocable living trust cannot name a guardian for minor children – only a will can.
There are two parts of being a guardian – one is for the child’s well being and one is for the child’s financial affairs. You can have one guardian who does both or decide only one is necessary.
How will my assets be distributed?
Although most couples leave all assets to the surviving spouse, an estate plan also aids in determining how and if children will receive any of your assets.
Insurance is an important aspect of an estate plan because it addresses what happens if there is a loss of income due to a death or disability. Since I am not an insurance salesman or financial planner, I do not give advice on what you may or may not need. However, it is important to plan for unexpected events by purchasing life insurance (either whole life or term), disability insurance, and/or long term care insurance. There are lots of options out there, so you should sit with a qualified financial planner or insurance salesperson to decide what is needed.