A good estate plan covers contingencies, takes control of the future, and involves clear communication. This post is the second in a three-part series that will discuss these three “c”s of estate planning.
Taking Control
Estate planning is really recognizing that things will happen when you are gone, and decisions will have to be made. If you don’t make those decisions, your children, other people, and sometimes the court will have to make those decisions.
Children
Minor children need guardians. If you can’t be there for them, who should be that person? Money issues are compounded when dealing with minors. Under the Uniform Transfer to Minor’s Act (California Probate Code Section 3900 and following), an adult will handle the inherited estate until a child becomes an adult at age 18. Practically speaking, if you haven’t taken control by creating an estate plan, the guardian will only have access to the money through permission from the court – a time intensive and potentially expensive process. In short, if you don’t take control, a child may be left with a large inheritance that is difficult to use for their benefit while they are a child, and suddenly becomes entirely theirs at a very early age.
Choosing your beneficiaries
Sometimes your intended beneficiaries are the default provided by law, but not always. I’ve had many conversations with people want want this particular thing or that to go to a specific person. If you don’t take control by making that desire legally binding for later, odds are, it won’t happen. Or I’ve seen parents leave everything to the most responsible child with the assumption that that child will “fairly” distribute the estate to his or her siblings. This leaves that child and the other beneficiaries with ugly tax consequences that were completely avoidable.
Creating protections
For larger assets, it may be possible to add protection from creditors, or ensure that an asset will stay in the family and not go to an ex-spouse. A simple will printed off the internet can’t accomplish these things.
Cutting off arguments
“This is what Mom or Dad would have wanted” is a great way to start or end an argument. The way to make sure it ends a potential argument is by making it clear what you wanted. There are certain items in every family that represent treasured memories that are unique and sentimental. You can reduce the potential for future arguments and hurt feelings between your children by communicating your wishes. You can make sure your wishes are heeded by including them in your will or trust.