Setting legal guardianship for your children and making sure you leave enough of an inheritance to support your children are the key objectives to estate planning for young families. Life insurance and a revocable living trust are the primary components for achieving these objectives. As an Ohio estate planning attorney, I advise young families to plan ahead in case a tragic event, like an automobile accident, occurs and claims the life of both parents. Consider who will care for the children. Will there enough money left behind to care for the kids until they become adults? Or will they be a financial burden on the ones who take them in? Planning ahead ensures that people you trust will have legal guardianship of your children and that your children have enough resources to get by until they are adults. Estate planning can also protect your children’s inheritance from being squandered away. Assigning legal guardianship for your children can be done in a will or included as terms in a trust—usually a revocable living trust. An Ohio estate planning attorney can help you draft the necessary documents to achieve this. Select guardians carefully. Choose guardians willing to take on the responsibility— especially if more than one child is involved. Also consider whether the preferred guardians are financially secure and fiscally responsible. Even the most well-intentioned person can be tempted to dip into a child’s inheritance when debts and bills are piling up. Insurance—a Necessity for Your Children’s Future Most young families don’t have enough assets to fund all the needs of their children until they become adults. Usually this is rectified through life insurance policies. Term life insurance can provide significant cash benefits upon the parents’ death at a reasonable cost. Permanent life insurance may also be used, but it’s often cost prohibitive for young families. I often recommend buying term insurance that can be converted to permanent insurance later. How much life insurance should you buy? How much life insurance you buy will depend on several factors. These include:
- The kind of lifestyle you want your children to be able to live after you’re gone The age of your children (annual lifestyle cost x number of years until the youngest turns 18)
- Your debts and obligations—your children will only receive what is left after all your debts are paid
- How much you can afford
In addition to helping you assign legal guardianship for your children, your Ohio estate planning attorney can help you determine how much insurance to buy and what kind to buy. Revocable Living Trust—Protecting Your Children’s Inheritance A revocable living trust is the component that ties your planning together and protects your children’s inheritance from misuse. A revocable living trust is used, usually, rather than an irrevocable trust, because it allows you to change its terms or absolve it completely when your children turn 18 and their needs such as legal guardianship change. An irrevocable trust does not permit this. When you create the trust, use the terms of the trust to assign legal guardianship for your children, state how the inheritance is to be use, and put limits on how fast the inheritance can be spent and what it can be spent on. There are many more details to be considered when planning for your children’s future wellbeing. Your Ohio estate planning attorney can help you identify those considerations and advise you accordingly. Click here for a free consultation regarding your legal guardianship and family estate planning needs.