What every young mom needs to know about wills and estate planning
As a young mother, your days are filled with numerous activities; typically the ones that get the least amount of attention are those that are financially related. Even when you feel like you are being pulled in a million directions, you can still develop an estate plan. This can help protect your family and other loved ones should anything happen to you.
One way to make the process less overwhelming is to assign each of the following ideas to a month and by the end of a year, you will have put in place a plan that can allow for a greater peace of mind.
Do
- ensure all your accounts have the correct beneficiaries
- develop a simple will
- create an advance health directive
- have adequate life insurance
- establish guardianship provisions
Don't
- let the courts decide
- forget online account access
- think you are without assets
- choose a guardian without revisiting it periodically
- neglect to memorialize your wishes
Do ensure all your accounts have the correct beneficiaries
No matter what financial stage of life you may be in, having the proper beneficiaries on all your accounts is essential for a young family. Your spouse or significant other will most likely be your first choice. Take care in naming a minor child as a beneficiary as you may need to first set up a trust in their name. Speaking with an attorney is wise when making these decisions.
Do develop a simple will
Although it may be tempting to either skip a will, or to develop one on your own, seek out the services of an attorney to make sure that you have all areas adequately covered.
A simple will can also include trust provisions to manage assets that may be left for minor children. An estate-planning attorney can advise you as to what makes the most sense in your own particular situation.
Do create an advance health directive
This legal document provides both a living will and power of attorney for medical reasons. A living will gives your loved ones specific directions as to how you want medical decisions carried out in case you become incapacitated.
The power of attorney allows the person you designate to carry out the wishes you have outlined in your living will. So why is this important for young moms? You want the person you trust to be the one that has the authority to protect your interests and carry out your wishes.
Do have adequate life insurance
Day to day, your child or children rely on you for all their needs, so be sure to protect their future in case anything were to happen to you. Although you may have life insurance coverage at your place of employment, speak with a qualified financial advisor to ensure that this coverage is adequate. Confirm that you are not paying too much, and learn how portable the policy is—in the case that you ever leave your job.
If anything were to happen to you, life insurance can cover the cost of your children’s day-to-day care and even college expenses down the road.
Do establish guardianship provisions
Through a will you can appoint the person(s) who will take care of your children at your passing. This won’t be easy, as you should consider lifestyle, religious views, and values when deciding. Oftentimes, grandparents are chosen as guardians, but if there are health or financial issues, they may not be the best fit.
After thinking through all of the possibilities, sit down with the individuals who are your final choices and talk to them about your wishes. These conversations can be really insightful and will most likely help you to decide whether or not the individuals you have chosen are a good fit.
Do not let the courts decide
Unless you specifically name a guardian in your will, the courts will decide who should care for your children. The courts will assign the guardian who will, depending on what state you are in, decide where your child will live, go to school, or how they obtain medical care.
Typically, anyone can ask to be considered as a guardian and the courts will make the final decision based on what they believe to be in the best interests of the child. As time goes on, you can also change the guardian you have chosen and, at times, it makes sense to do just that.
Do not forget online account access
Finding login information and passwords can be extremely difficult for your loved ones after your death. In 2007, Microsoft found that the average person had 25 online accounts—a number that is surely growing each day. Thankfully there are many ways to handle the transfer of this information including a sealed envelope in a safe deposit or lock box and reputable online archiving services.
Compounding the issue is the fact that different states have varying rules governing how accounts should be handled if the owner passes away. For most of us, our financial information is only available online with electronic statements replacing those on paper. Because of this, a paper trail might not even be available to give clues to loved ones that an account exists. To avoid confusion and the potential for lost assets, make a digital plan a part of your overall estate plan.
Do not think you are without assets
You may be thinking that you don’t have enough assets or any at all to justify having a will. However, the more critical issue, once again, is that you can designate via your will the guardian of your children, rather than having the courts decide for you. In addition, if you have life insurance coverage either on your own or through your work, proceeds at your death can be used to cover your children’s current and future financial needs.
A trust provision within a will allows for the transfer of any financial assets to happen according to your specific wishes thereby protecting your children and securing your intentions.
Do not choose a guardian without revisiting it periodically
We all know that situations change. The guardian you once felt would be the best fit for your child, may not be the ideal candidate now. Perhaps they have divorced, moved to another state, or have agreed to the responsibility just because they feel duty-bound. You may also have a younger sibling that was at one time too immature to handle taking care of your children, but is now a responsible family person who has the room and love to care for them.
Checking in on your guardian provisions makes sense, and any adjustments will ensure you have chosen the best person(s).
Do not neglect to memorialize your wishes
Having a letter of instruction for your guardians can provide a tremendous amount of guidance after your passing. Although it isn’t considered a legal document, it does provide a roadmap for who should be contacted at your death (attorney, financial advisor, CPA), a listing of your financial assets or holdings, and all the special details about your child(ren) that only you or someone very close to your family may know.
These details can include your philosophy around education, your views on healthy living, and how you feel about discipline. For some families, information around religious traditions and upbringing will also be important to define.
Summary
So once you have completed your estate plan, give yourself kudos! You have done what so many people fail to do—even the rich and famous. As you begin to work on your estate plan, make sure that it is coordinated with your investments, life insurance and any other planning you have done to date. This can help lessen the stress if a traumatic event does occur for your children and loved ones.
