Becoming a parent means taking responsibility for someone else’s life for a time. Children cannot make their own medical decisions or earn money to pay their bills. They rely on their parents for virtually everything.
New parents typically want to provide everything for their children until they become independent adults. Unfortunately, a small subset of parents will not live to see their children reach adulthood. Some kind of accident or illness will lead to their premature death.
Children who lose their parents have significant disadvantages to overcome. They are very vulnerable without parents to care for them. Thankfully, proper estate planning can help parents prepare for even the worst-case scenario. The following estate planning moves are most beneficial for those with minor children.
Reviewing life insurance
Some people don’t bother purchasing life insurance until they become parents. Others make major changes to their policies when they are responsible for children. Reviewing financial matters can help parents verify if they have enough coverage based on their debts on the care costs of their children. Parents may also want to change the party named as the beneficiary of their life insurance policy to ensure that the funds go to support their children.
Choosing a guardian
Ideally, if something happens to one parent, the other will be able to take over caring for the children. Sometimes the other parent dies or has a medical emergency. The decision to name a guardian in someone’s will is crucial for the protection of minor children. A guardian can fill a parental role and ensure that children do not end up in foster care if something happens to their parents.
Preserving resources for the children
Parents sometimes make the mistake of naming minor children as beneficiaries in their wills. Unfortunately, minor children cannot directly inherit assets from a parent’s estate. Their surviving parent or legal guardian will technically have control over their inheritance. The decision to name children as beneficiaries in a will is therefore less effective than parents initially expect. They may want to create a trust as a way of preserving resources for their children if something were to happen to them. Trusts can limit when guardians can access inherited assets and can earmark certain resources for the children when they become adults.
Putting together a thorough and well-considered estate plan is a smart move for a parent hoping to protect their children in an unpredictable world.