Estate planning is a process that addresses death and personal vulnerability. People in a variety of different circumstances may need to address their own mortality. Business owners and those with substantial personal resources may feel compelled to establish estate plans to protect their holdings.
Parents with young children often establish legal documents to ensure the comfort and well-being of their children even in a tragedy or emergency scenario. There are several ways in which proper estate planning can protect minor children. The three steps below can help provide protection for children who lose their parents.
1. Selecting an appropriate guardian
When parents die, their children could end up in foster care or a state facility. Arranging ahead of time for a specific person to act as a guardian is often the best arrangement possible. Parents may need to talk with people whom they trust to choose appropriate candidates to take over a parental role in the event of a tragedy.
2. Preserving an inheritance
Technically, children can inherit from a parent’s estate even if the parent dies without a will. Children have protection under intestate succession laws as heirs. That being said, assets inherited through intestate succession or because of a will are potentially vulnerable to misuse by guardians.
Parents may want to fund trusts as a means of preserving resources for when their children turn 18 and no longer have the ability to rely on a guardian. Otherwise, there is no way of knowing what a guardian or surviving parent might do with the inheritance intended for the children.
3. Adjusting life insurance coverage
Life insurance can play a critical role in the support of minor children who have lost a parent. Life insurance proceeds can pay off a mortgage and outstanding student loans.
The funds received through life insurance can also help replace a parent’s income to help ensure that there are resources available for the basic needs of the children. Parents thinking about what might happen in an emergency scenario may need to review their life insurance policies and increase what they have purchased to more effectively offset recurring expenses and existing debts.
Discussing current finances and family circumstances can help parents ensure that their estate plans provide their children with adequate protection. New parents often need help establishing thorough estate plans that protect their children should a tragic situation arise.