Young couples with minor children may not have a great deal in terms of assets while they are alive and well. But there are some aspects of estate planning that would be wise to address even when there isn’t much of an “estate” to plan for. Those issues are:
– Guardianship of your children if the parents were lost to death or incapacity
– Health care decisions for you and your spouse if you were not able to make them yourself.
– Authorization to act on your behalf personally (i.e. not on behalf of your trust)
– Life support termination power
– Financial security for the surviving spouse
Guardianship. There’s a lot more than money at stake when you have minor children. Although we hate to think of it, what if your children were left without either one of you to raise them because you are both deceased or disabled? Would you want an anonymous court appointing a stranger to raise your children?
Proper estate planning can provide you with the peace of mind. Armed with the proper documentation you can be assured that those close to you who you chose will be raising your children. Not only will your choice of guardian be honored but you will also guarantee that your guardians can take control of your children immediately instead of waiting for a court to act.
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The ones who you choose to be your children’s guardians are not usually the same one who you will want to be Trustee. The Trustee is the one in charge of investing and distributing trust property. It is important to have investment and distribution control separate from control over your children. However, this varies from case to case and is part of the counseling process.
Health care decisions. When this issue is raised many people mistakenly think of end of life decisions, so-called “pulling the plug.” In the vast majority of cases your Health Care Power of Attorney is used for a condition from which you completely recover.
For example, I recently underwent an appendectomy. This is routine surgery. But it is still done under general anesthesia which means if something came up during surgery the health care agent would become the decision maker. Anytime you lose decisional capacity due to accident or illness your health care power will become relevant.
Moreover, did you know that the moment your children turn 18 you are no longer entitled to make their health care decisions? If you re still the ones who are the likely decision makers then it is important that they sign such a power appointing you as health care agent.
Authorization to act on your behalf personally (i.e. not on behalf of your trust). This is commonly know as a Property Power of Attorney. But it has a lot less to do with property in a living trust centered plan and more to do with non asset related matters. For example, if you are unconscious who will sign your income tax return? Who will hire a lawyer if you were hurt due to an accident that gave rise to liability? Who will open your mail or take care of your pets?
A Property Power of Attorney does have a little to do with your property too. If you have a properly funded living trust, your property will be in the trust. The person who you named to be your disability trustee will be in control over your property.
But some property often doesn’t go in your living trust such as retirement plans, life insurance policies, and annuities. If money is needed for your care from these financial products who will access them? Not the trustee of your living trust. He only has control over the property inside your trust. Your agent under Property Power of Attorney is the one who can help with these assets.
Life support termination power. In Illinois this is called a Living Will. It confuses many people because it is not a living trust and it is not a will. It is a document in which you express the desire to refuse medical treatment under certain circumstances.
For my view on the Illinois Living Will statutory form see my Blog post “Two Reasons Why Living Wills, Won’t.”
Financial security for the surviving spouse. Even though a young couple with children may not have accumulated much in assets while they are both alive, there may be significant wealth after the first death. The reason is life insurance. Term insurance for young couples is inexpensive and it serves the purpose of making sure the survivor has amply assets to see the kids through college without financial hardship to the survivor.
Oftentimes couples make the mistake of buying the insurance only on the life of the breadwinner, usually the husband. In my opinion this is misguided. The reason why he can win so much bread is because his domestic life does not require his time and energy. If the mother dies the husband’s ability to produce will be diminished. Plus he will likely bear the expense of caretakers, housekeepers, gardeners, chauffeurs, etc. that were once performed for “free” by the mother. So don’t forget to insure the mother’s life too.