Lost in the whirlwind of raising a young child or children, you may one day come to the sudden realization that you and your spouse have not created an estate plan. You know you are supposed to do this when you have kids but you may not understand what means or how and why it’s important. We hope this article will give you a brief overview of the topic.
Which Documents Do I Need?
For parents of small children, estate planning means creating and putting in writing a plan for what happens if one or both of you dies or becomes incapacitated. In most cases this means both spouses create and sign an Advance Directive for Health Care, a Durable Power of Attorney, and a Will. The Advance Directive for Health Care allows you to choose the person you want to make health-care related decisions for you in the event you are still living but unable to communicate. The Durable Power of Attorney allows you to choose the person you want to make financial decisions for you in the event you are still living but unable to communicate. There are your “incapacity planning” documents and are very important, but for the purposes of this article, we will focus more on your Will which is your “estate planning” document.
Last Will & Testament
Your Will governs who receives your property after your death and how and by whom that process is managed. In Georgia, if you die without a Will, we have a law that determines who gets your property after your death. This is called the Georgia Law of Intestacy or Intestate Succession. In Georgia, if you are survived by a spouse and children, your spouse shares your Estate equally with your children but receives no less than one-third. This is inconsistent with most married couples’ intended outcome. Most of the couples we work with intend to leave their entire estate to their spouse. Then, when the second spouse dies they intend the estate to be split equally between their children. If you have young children at home and intend that upon your death, your entire Estate go to your spouse, you need to create a Will that expressly states this. Another consideration is who will serve as executor for your Estate. For most married persons, their primary executor will be their spouse. But what happens if your spouse is not able to serve as Executor? Who will serve as alternate Executor? This may be a parent, a sibling, or sometimes a trusted friend.
Providing for Your Children Financially
Additionally, minor children cannot legally own property in Georgia. When minor children inherit property they must have a “conservator” appointed for them through the probate court. This conservator is chosen by the probate judge and serves under the supervision of the court. If you wish to leave property to a minor child under your Will, it should include a “testamentary trust” for the child. This trust is managed by a trustee of your choosing for the financial support of the child. As part of the planning process you will also choose an age (or ages) at which the trust ends and your child(ren) can make their own choices with the money/property they inherit from you.
Many new parents are just beginning their careers and simply haven’t had the time to accumulate significant assets. For this reason, their financial planning often includes life insurance to ensure that a surviving spouse has financial resources to raise children. Obviously it makes sense to name your spouse as the beneficiary of your life insurance policy. However, many parents of minor children make the mistake of listing the children as secondary beneficiaries of the policy. Remember the discussion above about minor children requiring a conservator when they inherit property. If you have a well drafted will with a testamentary trust for your children, a better strategy would be to list your Estate as the secondary beneficiary of your policy. This allows your life insurance proceeds to flow into your Estate and then fund your children’s trust(s) with your chosen terms and trustee. Under this scenario, no conservator is required.
Choosing a Guardian for Children
A child’s parents are considered their “natural guardian(s)”. When a child loses both of their parents while still a minor, a guardian must be appointed for them through the probate court. A guardian raises the child and is responsible for things like their health, education, and general well-being. When you create a Will, you can choose the person you want to serve as guardian for your minor children in the event something happens to both parents.