As a parent, securing your children’s future is a top priority. Creating an estate plan is one of the best ways to do this.
An estate plan is a set of legal documents that specify how you want your assets to be managed and distributed upon your death. This includes everything from your home and bank accounts to any investments and other valuable possessions.
A 2021 survey found that among their users, only 28% of Black Americans had a will.
An estate plan helps to ensure that your wishes are carried out while also reducing the burden of taxes and additional fees on your family. It can also help to protect assets from being taken away in a lawsuit or if you become disabled.
Wills In Estate Planning
An estate plan starts with a will. A will is a document that specifies who’ll inherit your assets after your death. It can also determine who will act as the executor of your estate and who’ll be responsible for caring for any minor children you may have. Though traditionally done with pen and paper, wills can now be made through the help of the internet.
An online will is a legal document that can be used to document a person’s wishes regarding their estate. It is often a more accessible and cost-effective way to draft a will than using a lawyer, although the document’s quality is still essential. It will typically cover the same topics as a traditional will:
- Who should inherit your assets?
- How should debts be handled?
- Who should manage the estate?
- Who should act as a guardian for any minor children?
Though the rules may vary from place to place, most sites require that the document be signed by two witnesses and notarized to be legally binding.
What Are The Benefits Of Having An Estate Plan?
One reason why many opt for estate plans is for financial empowerment. Having a will ensures that children’s financial needs are cared for in the event of death or incapacity. This is made possible for various reasons:
1. You Can Designate Guardians For Minor Children
Creating an estate plan gives you the power to decide who’ll care for your children should you pass away. This guardian (or guardians) shall be tasked to provide care, support, and guidance for your children until they reach the age of majority or can manage their affairs on their own. Without an estate plan, it may be left up to a court to determine who’ll be appointed as guardians for your children.
When choosing guardians for your children, selecting people who share your values and beliefs is essential. Consider who’ll make the best role models and has the time and energy to provide them love and attention. It’s also necessary to ensure the chosen guardians can take on this responsibility. Thus, it may be required to talk to your potential guardians so they know their roles and expectations.
2. You Can Establish Trust For Your Child’s Education
Trusts are an essential part of estate planning, used to provide for your children’s educational expenses or other beneficiaries. With a trust, you can designate funds to be set aside for tuition, room and board, books, supplies, and any other college-related expenses.
When creating a trust, you can name a trustee who’ll manage the money according to your instructions. You can also determine when funds should be released, such as when the beneficiary turns 18 or graduates from college. Trusts are often funded with life insurance policies or other assets, so it’s essential to speak with a financial advisor about how best to structure the trust for your needs.
By establishing a trust, you can ensure that your children’s future educational expenses are handled in case something happens to you. This can be especially beneficial if you need more money to cover all the costs of higher education. Additionally, a trust can help your children avoid taking on excessive amounts of debt when they’re ready to attend college.
3. You Can Designate Your Children As Beneficiaries
Life insurance policies and retirement accounts are essential investments that can provide security for your children. Through estate planning, you can designate your children as beneficiaries on these accounts, so they’ll receive the financial benefits after your death. By doing this, you can ensure that your children will receive a steady source of income in the event of your death and help protect them from any potential financial hardship.
Additionally, it’s important to remember that some life insurance policies and retirement accounts may be exempt from taxation. This means that any money left to your children through these accounts won’t be taxed, allowing them access to more funds for their future needs.
Creating an estate plan can be complex, but it’s essential to ensure that your wishes will be honored after you pass away. By taking the time to consider the different aspects of estate planning, you can ensure your loved ones are protected.