When you’re buried in car seat options, nursery decor, and daycare considerations, estate planning is probably the furthest thing from your mind (or not even on your mind at all).
You’re progressing in your career, making financial headway, and bringing a whole new life into the world. There are decisions around every corner and the weight of it all can feel…overwhelming.
So while I’m not out to pile on more to your to-do list, I do want to encourage you and your family to consider carving out time for estate planning. I’ll admit, it can feel premature and a bit awkward to prepare for your death while you’re starting your family. But that’s why you have people in your life (like your friendly financial coach) to remind you of and help you with important matters.
You may think of estate planning as something only the ultra-wealthy have to consider, but truthfully, everyone (and their families) benefit from a well-thought-out plan. For a relatively small amount of time and expense, your family can feel at peace knowing your loved ones will be taken care of if the unexpected happens.
Estate Planning 101
Estate planning is simply the process of creating a plan for after your death or incapacitation. Your estate plan will include the management and distribution of your assets such as:
Bank accounts
Real estate (personal and investments)
Retirement accounts
Life insurance policies
Investments
Personal property
Estate planning can involve the creation of legal documents such as wills, trusts, and powers of attorney, as well as the designation of beneficiaries for certain assets. It can help protect your assets from creditors, lawsuits, stress, and expense. An estate plan can also give your family privacy and provide ongoing management of assets for your children.
3 Reasons Why Estate Planning Matters for Young Families
If you don’t have an estate plan, you run the risk of not having your desires, goals, and objectives carried out after you pass. Here are three specific reasons why that matters.
1. Your Assets Matter
These can go into probate, a legal process (that can take years) of administering your estate after you die. Your assets are left in the hands of U.S. government courts.
There are specific processes for each state, but typically assets will go to a surviving spouse, then children, grandchildren, parents, and siblings, though not guaranteed.
Action Step: If you desire certain people to receive (or not receive) your assets, you’ll want to get it in writing. Creating a trust will ensure you’re in control even after you pass away.
2. Your Children Matter
This is perhaps the most important reason to put together an estate plan. If you and your partner die without specifying whom you want to care for your children, the courts will be left to decide. They will seek to choose the best option, but they don’t know any details about your family values, history, relationships, etc.
Action Step: Talk to your partner today about who you would like to care for your children should you both die (be sure to talk to that individual or couple as well). When choosing a guardian(s), consider their age, health, values, living situation, etc. You can declare your chosen guardian in a simple last will and testament, provided here.
3. Your Wishes Matter
If you become unable to make decisions for yourself, your family will be left assuming what you’d like done. This can create frustration and discord among your loved ones and they may choose something you don’t agree with or want.
Action Step: You can create an inexpensive advanced healthcare directive quickly that will officially and clearly state your end-of-life wishes. Unexpected events cause enough pain and stress already without the burden of your family members guessing (or arguing) about your wishes.
Estate planning for families ensures you’re in control of what happens to your assets, children, and even your own body.
How to Set up Trusts
Trusts are an essential part of estate planning, allowing individuals to transfer their assets to beneficiaries while minimizing tax obligations and ensuring the assets are managed according to their wishes.
Trusts vs Wills
Both trusts and wills are a part of estate planning, but there are key differences between the two.
Trusts
A trust is a legal arrangement where you transfer assets to a trustee who manages those assets on behalf of your beneficiaries according to your instructions. There are two main types of trusts: revocable and irrevocable. A revocable trust allows you to make changes to the trust at any time during your lifetime, while an irrevocable trust cannot be changed once it is created.
Trusts provide flexibility and control and can be used to minimize estate taxes, protect assets from creditors, and provide for the financial needs of beneficiaries. Trusts avoid probate and are private documents.
Wills
A will is a legal document that specifies how your assets will be distributed after your death. It is a one-time document that cannot be changed once you have passed away.
Wills typically name an executor who is responsible for managing the estate, paying debts and taxes, and distributing assets to the beneficiaries. Wills become public records when they are filed for probate, providing your family with less privacy.
6 Steps to Setting up a Trust
Trusts are great choices for young families because of the flexibility they provide. You can get a trust created today in a couple of simple steps.
1. Decide which trust is best for your family. Your objectives for your trust will help determine which trust you choose. What do you want to accomplish with the trust? Do you want to protect your assets from creditors, minimize estate taxes, provide for the financial needs of your beneficiaries, or ensure that assets are managed and distributed according to your wishes?
An irrevocable trust has certain rules and should be set up with an estate attorney. A revocable trust has more room for error and can be set up on your own.
2. Choose a trustee. The trustee is the person or entity responsible for managing the assets in the trust and distributing them to the beneficiaries according to your instructions. You can choose a trusted family member, friend, or professional trustee, such as a bank or trust company.
3. Draft the trust document. Your trust will outline many important parts of your trust such as:
The grantor (that’s you!)
List of assets within the trust including any personal property you own
Beneficiaries (most likely your children)
Trustee and successor trustee (in case your trustee passes away)
4. Create a trust bank account and fund the trust. Your trust is its own entity. It will have a name (such as Smith Family Trust dated 5/1/23), its own account, and can be the beneficiary of other assets such as retirement accounts and life insurance policy payouts upon your death.
An easy way to fund your trust is by setting up a bank account. If you want to create a trust fund, you can transfer money into your trust account. You can also transfer real estate, investments, and other assets. There are certain tax implications to transferring assets to your trust, so you’ll want to work closely with a financial professional and attorney.
6. Manage and update your trust, as needed. After the trust is funded, the trustee will be responsible for managing the assets in the trust according to your instructions. The trustee will be required to file tax returns, keep accurate records, and distribute assets to the beneficiaries as directed.
Kickstart Your Estate Plan with Wealthly
At Wealthly, we understand young families are facing a lot of decisions and to-dos. Many are struggling with managing budgets, planning for retirement, and investing wisely. On top of balancing a career and small children!
That’s why a financial coach can be an invaluable resource when it comes to discovering and implementing financial strategies. I use my experience and knowledge to help you understand your unique financial situation, identify your goals and priorities, and develop a personalized plan to achieve them.
Proper estate planning is how you ensure your hard work, wealth and strategic planning continue into the next generation. To see if we can help you kickstart the conversation around estate planning (it is recommended to still involve an attorney), email me at latoya@wealthlyliving.com or click here to fill out a contact form today. We’ll be in touch soon!
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.
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