Myth #1: Because I stay at home with the kids, I do not need an estate plan.
Estate planning is about more than just passing along your money and property. An estate plan allows you the opportunity to designate who will handle your financial affairs and medical decisions if you cannot. Your significant other does not automatically have such authority. Without a financial power of attorney naming a person to handle your financial affairs and a medical power of attorney naming a person to make medical decisions for you when you cannot, a judge will choose someone to make these decisions for you. An estate plan also allows you to designate who will care for your minor children in the event you cannot. To ensure that the person who is making decisions on your behalf or for your children is the one you want, you need properly executed, legally binding estate planning documents. Without these documents, a judge will choose the person responsible for raising your child.
Myth #2: I am a stay-at-home parent, so I do not need a financial or estate plan because I do not earn an income.
While most people think about trying to replace lost income in the event that a parent or significant other dies, a stay-at-home parent’s contributions should not be overlooked. If the stay-at-home parent dies, who will do all of the tasks that they normally complete? One option would be to hire someone to watch the children, cook the meals, and clean the home, but the surviving parent would need to have the funds to pay that person. On the other hand, the surviving parent may decide that they need to step away from their job or scale down the amount of time they work so they can perform all of the stay-at-home parent’s responsibilities. Either option would be more feasible if the family had access to an adequate amount of life insurance proceeds to fund these and other future needs. It is also important to protect the insurance proceeds to make sure that they are available to the family and do not end up in the hands of a new spouse, creditor, or scam artist.
Question #1: No one will ever love my children as much as I do. How do I choose the right guardian?
Choosing someone to care for your children in the event that you cannot is a difficult choice. You are right that no one will ever love your children as much as you do, but it is better if you, and not a judge, choose their guardian. If you do not choose a guardian for your minor children, a judge will make the decision. The judge will not have nearly the same amount of information that you have about the proposed guardian to help them make the best decision.
When choosing a guardian and backup guardians, consider the following:
- Do they share your views on religion?
- Do they have experience raising children?
- Can they undertake the financial responsibility and time commitment of raising your children?
- Will they have the physical health and stamina to take on this responsibility?
Question #2: Does the person who will raise my child have to be the same person who manages the money on my child’s behalf?
Not everyone is good with money and not everyone wants children. With a proactive approach to estate planning, you can make sure that you choose the right people to protect your children based on their strengths. If someone is really good with managing finances but does not have or want children, being the trustee of your children’s trust may be the best fit for that individual. They may possess a superior expertise that will allow any money you have left your children to be invested and managed for the best possible outcome.
On the other hand, you may have a loved one who is kind and nurturing but not the best with money. This is okay. This person may be best suited to be your children’s guardian. They may possess the right amount of patience to guide your children along the right path and provide the necessary emotional support to deal with their grief. Whenever the guardian needs access to money on your children’s behalf, they can reach out to the trustee, who can provide that money according to the terms and conditions you have listed in the trust.