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  • By: Robert Maines, Esq.
Attorney with their client review legal documents, symbolizing estate planning - Maines Legal

In this article, you’ll discover:

  • The importance of having an estate plan that provides for your minor children.
  • How to provide for your children’s education in the event of your death.
  • The biggest mistakes parents make regarding estate planning.

Why Is Estate Planning Important For Families With Minor Children?

When people pass away, they are legally considered one of two things: testate or intestate. If they have a will, you’re testate; if not, you’re intestate.

In Tennessee, if you die intestate or without an estate plan, there are predetermined state guidelines: The court will decide who is awarded custody of your children and who controls the inheritance you leave behind, among many other issues the rules cover.

How Can I Choose The Right Guardian For My Child?

Choosing a guardian for your child is different for each individual. You must consider your potential guardian’s values, parenting style and whether they can provide a loving and stable home. Everyone will be different, but you’re looking to choose someone with a parenting style close to yours.

It would help if you discussed your intentions with whoever you choose. You don’t want this decision to be a surprise because your chosen guardian might not be willing and able to do it. The age of your children, the potential guardian’s age and other factors contribute to that decision.

If children are school-age and you want to ensure they stay in their current school, you want to choose someone geographically close to you. If you don’t mind them living and attending school elsewhere, look at how stable the potential guardian’s life is. Do they move around a lot? Some people do.

Also, if your child has any special needs or health concerns, would the guardian be able to provide the care needed?

What Is The Role Of A Trustee In Managing My Child’s Inheritance?

If you don’t choose someone to be the guardian or trustee of your child’s inheritance, you want to ensure whatever you leave behind will be there when your children reach an age where they can use it.

The guardian and trustee can be the same person or separate people. In either case, choose someone who will manage those assets for your children until they reach sufficient maturity to manage them. You also want to choose someone who understands how and when to reinvest those funds to ensure that they continue growing for the benefit of your children.

How Can I Provide For My Child’s Education In My Estate Plan?

In providing for your child’s educational future, it’s advisable to consult a financial advisor who is more focused in this field. They can detail the financial and tax advantages or disadvantages of your options.

A financial advisor may suggest a 529 College Savings Plan. This plan allows you to invest funds for your child’s education. There are tax advantages to a 529 plan, both for the parent and the child. Under this plan, a significant amount of money can be put aside with tax benefits in the long run for both the contributing parent and the recipient child.

You could also choose an educational trust, where you set aside money for a trustee to invest. The trust is tailored to your specific wishes regarding where the child goes to school and how the child can access the funds. Whether the trustee is paying out a stipend to the child or the school is a choice for the grantor.

You can also make specific bequests in your will where you leave a certain amount of money directly to a beneficiary for educational purposes. This strategy is direct, but it lacks tax advantages and places a lot of faith in the beneficiary.

You can also set up custodial accounts to set aside educational funds. These accounts are a provision of the Uniform Gift to Minors Act and the Uniform Transfer to Minors Act. They offer less control than a trust but some of the same tax benefits and flexibility as the previous plans.

Finally, life insurance covers your end-of-life needs, direct payments for burial, and the cost of paying off your home. However, you can also choose life insurance options that pay educational expenses. If you’re setting aside a portion in a life insurance policy for education, the funds can be available no matter when you pass away. Sometimes, the funds set aside for educational purposes in that policy can even be bought out if you haven’t passed away.

What Are The Biggest Mistakes Families Make When Planning For Their Children?

A lot of people with children overlook estate planning. As a whole, the majority of people with young children don’t even think about end-of-life issues because they’re still young. It’s not foremost in their mind.

Many young parents need more life insurance than they currently have. They have yet to set aside money for educational purposes. They also don’t understand the importance of finding someone to care for their children in the event of their death. They automatically assume their surviving spouse will be present to take over.

Sadly, you can have an instance where both parents are no longer here simultaneously. Then, the children are left without care, and the state has to step in. Those are the situations you want to avoid. You need to set up those assets that pass outside of probate, such as life insurance, bank accounts, investments, CDs or any other type of investment with a pay-upon-death beneficiary.

How Can Parents Feel Confident And Prepared About Estate Planning For Their Children’s Future?

It helps to understand estate planning is not a “one-and-done” deal. When it comes to your children, you should modify your estate plan as:

  • Your children grow
  • Your financial interests change
  • Your work changes
  • Anything in your life occurs that may impact your end-of-life decisions

With these changes, your plan should constantly evolve as well.

Your plan needs to be flexible and ever-changing. Be prepared and confident enough to modify your current plan to accommodate changes when they occur. You want to ensure that as you move forward in your life and acquire more assets, they are directed in a meaningful way that benefits your children.

Still Have Questions? Ready To Get Started?

For more information on Estate Planning For Families With Minor Children, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (423) 456-4778 today.

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