4 Ways To Protect Your Kids if You Pass Away
Our most beloved relationships are the friends and family closest to us. And who are we closer to, aside from our spouses, than our children? We often think of them first when the idea of passing away is considered. But do you know exactly what you need to do to make sure they’re protected? Today we’re going to outline the 4 most important considerations you need to make to protect your children after you pass away.
1. Have A Thorough Will
A Will is the strongest argument for your wishes and desires when you die. It is the only ironclad document that tells everyone exactly what you want to happen. If there’s no will then friends, loved ones, and the court will have to spend a significant amount of time trying to figure out what it is you wanted to happen with your estate and the default rules provided by the Texas Estates Code will control. Wills can be very complicated, but we believe the following provisions are the most important things that should be included your Will to protect your children, especially minor children:
- Trust Minors cannot legally “own” property or have accounts. Trusts can be beneficial when there is as little as $75,000. When you think about the value of a house, retirement plans or life insurance many people can protect their children by setting up a trust in their Will. Without a trust, any life insurance proceeds, retirement accounts, bank accounts, etc. will go to the child(ren) but will either be held in the Court’s registry until they turn 18 or the Court may set up its own trust and appoint a corporate trustee to watch over the assets until the child(ren) turn 18. Either way, it is not you who gets to decide what the terms of the trust are, and it expires once your kids turn 18. By setting up a trust in your Will, you can determine when your kids get the principal (in legal terms corpus) of the trust. Until that date, the trust will provide for the kids based on the H.E.M.S. standard – Health, Education, Maintenance and Support. In my Will, I have my kids receiving any principal in the following proportions: ⅓ at 25, ½ of the remainder at 30, and the remaining at 35 – I did this with the general idea that 25 was when they might get married and need some funds, 30 might be when they have their own kid or kids and some extra money might come in handy, and 35 because they should be starting to think about retirement. You, not a court, get to make this decision. There are other considerations that are important here as well — for example: you may have a child that has special needs and this trust can be set up as a supplemental needs trust (sometimes also called a special needs trust).
- Executor & Trustee Name someone trustworthy to be the Executor of the Will. It will be the Executor’s job to gather all assets, pay all debts, and distribute the rest to the Trustee for the Trust you set up in your Will. The Trustee can be a corporate trustee (i.e. a bank that will manage the funds) or an individual. Corporate trustees can be good, but they charge a fee. These fees may be acceptable to you for piece of mind because it is unlikely that a corporate trustee is going to run off with the money. However, some families want to name a trusted family member, friend, or advisor as the Trustee. The trustee will be around until the trust terminates which can be many years.
- Guardian Name a guardian to look after your children. This can be done in the Will itself or as a standalone declaration (an official declaration outside of the Will).
For all of the jobs named above (Executor, Trustee, Guardian) the thing they should all share in common is that you trust them. In addition, you should also consider naming several different alternative people in case someone, for whatever reason, can’t serve in the roll you have assigned them. We recommend having a list of three people (or couples for Guardians) for each job.
2. Have Advisors In Place
This can really be boiled down to some age old advice: be prepared! One of the biggest causes of headaches that we encounter is a simple lack of preparedness. Make a list of all of your current advisors with their contact information and keep this with your Will. These can be your banker, financial planner, CPA, attorney, even your Doctor. Each may have information that your Executor, Trustee or Guardian may need in the event you pass away.
3. Ensure Beneficiary Designations
Make sure beneficiary designations are on all life insurance policies. Any other accounts that have beneficiary designations need to be worded correctly to make sure that they are included in the trust that you set up in your Will. The unintended consequence of having designations that do not follow your estate plan is that somebody may receive assets or funds that you never intended them to have.
4. Take care of “All the Other Stuff”
We’ve heard a couple different names for it like End of Life Binder or Death Book, but it’s a lot less cryptic than it sounds. Gather up all of the “other stuff” that it would be nice for your loved ones to have: passwords to online accounts, copies of the Will, pre-written obituaries, funeral plans, a list of people you’d like to be contacted when you die, etc. These minor, but important details, can be a burden on the family if they don’t have easy access to them.
Knowing what to do when someone dies can be an overwhelming experience. Make it easy to help guide your loved one when you are gone. This is why it’s a common practice of ours to add a cover letter to the Wills we draft with our contact information — we helped write it, we knew what you wanted, and we’re the most qualified to help probate it.
Consult An Experienced Estate Planning Attorney
We always recommend you seek the counsel of an experienced estate planning attorney if you have any questions about the estate planning process or writing a will. A qualified estate attorney will guide you toward the right choices for your family and everyone involved.
At Romano & Sumner, we pride ourselves on our ability to assist our clients in navigating complex legal processes like estate planning and will construction. If you have any questions, please feel free to contact us today.