4. Why You Need Guardians If You Have Young Children.

This is part 4 in my series, Estate Planning – What You Need to Know.

Why You Need Guardians if You Have Young Children.

If you have young children, the most important part of your estate plan is naming the guardians to raise your children if something happens to you and your spouse.

Typically, the guardians are named in the will. If the estate plan has a revocable living trust, the guardians are named in the pour-over will.

Naming guardians is not easy.  But if you have young children, you have to do it. If you don’t name guardians and something happens to you and your spouse, the court will have to decide who will raise your children.

Some of my clients have an easy time naming guardians. They have parents or siblings who are well qualified.

But many of my clients aren’t so lucky. They have a hard time deciding on the right people.

Here’s what I tell my clients who can’t decide on a guardian.

First. No one will be as good as you. No one is perfect (except you of course). If you are gone, someone you choose is better than the court choosing.

Second. The only people you can really choose from are those already in your personal network. Your network consists of your family and close friends. Some good. Some bad. Be realistic. Make the best choice of those in your network. That’s all you can do.

Third. You can always change your mind later. Most of my clients change their guardians every few years as their situation changes. You may meet someone with similar nurturing skills or your relatives may have matured into better parents.

Just know your choice is not permanent. Every decision we make today can only be made based on what we know today. If tomorrow changes, you can change your plan.

Knowing you can change your choice of guardians should take the pressure off. Your choice doesn’t have to be perfect, but you do need to choose.

Next up – Part 5. What if You Only Have a Will?

3. What if You Don’t Have an Estate Plan?

Here is Part 3 of my series, Estate Planning – What You Need to Know.

What if You Don’t Have an Estate Plan?

Simply put, if you don’t have a will or a revocable living trust, then when you die, your assets will go according to state law found in the probate code.

If you live in California it goes like this:

  • if you are married, your assets will go to your spouse.
  • If you have children, your separate assets will go either one-half to your spouse if you have one child, and one-third to your spouse if you have more than one child. The rest will go to your child(ren).

If you are not married and don’t have children, your assets will go to your next of kin in the following order:

  • to your parents, if they are alive, then
  • to your siblings, if they are alive, then
  • to your aunts and uncles, if they are alive, then
  • to your cousins, if they are alive, then
  • to your crazy fourth cousin twice removed, if he isn’t alive, then
  • to the state. Believe it or not (or course you can believe it) if  there are no living family members, the state will take your assets. The sophisticated legal term for this is “escheat” – your estate will escheat to the state.

You get the picture. If you don’t have a will or a revocable living trust which states how you want your assets distributed, you have what is called an Intestate estate. Intestate estates are distributed according to the state probate code.

Conservatorship

It’s bad enough to rely on the state to distribute your assets when you die, but it’s even worse to rely on the state to manage your assets while you are alive.

If you become incapacitated, which means you are no longer capable of managing your affairs, e.g. dementia, then someone else must manage your assets for you. For that someone to manage your assets, you must have already signed a Durable Power of Attorney.

A durable power of attorney is a document that gives the person you name the authority over your assets, like bank accounts and real property, if you become incapacitated. The person you name, your Agent, can take the durable power of attorney to your bank and get access to your accounts to take care of you – pay your bills, etc.

However, if you did not sign a durable power of attorney, no one will have the authority to manage your affairs. And once you become incapacitated, it’s too late to sign a durable power of attorney because you are incapacitated. Incapacitated people cannot sign legal documents.

So now what? Your loved ones will have to hire an attorney and petition the court to appoint one of them or someone the court chooses as your Conservator. A conservator is a person authorized by the court to manage your affairs, and in many cases must submit an account of her activities to the court for the judge to review. It is an expensive, tedious and nightmarish solution, which could have been simply avoided if you had signed a durable power of attorney.

Bottom line: If you don’t have an estate plan, state law will determine who gets your stuff, and if you become incapacitated, the court may end op overseeing the management of your assets.

Next up is Part 4.  Why You Need Guardians If You Have Young Children.

1. What is an Estate Plan?

In the next two weeks, I will publish my new series entitled, Estate Planning – What You Need to Know. Here is part 1.

1. What is an Estate Plan?

An estate plan is a set of legal documents that allows certain things to happen when you die or if you can no longer manage your affairs.

If you have young children, it names the Guardians you want to raise your children if something happens to you and your spouse. If you have young children, this is the most important reason to do your estate planning.

It names the person you want to manage your estate when you pass away or if you become incapacitated. You don’t want a judge who doesn’t know you or your family to make the decision for you.

It sets out your plan of who you want to get your assets. You don’t want your family fighting over your stuff.

It can also significantly protect the assets you leave your children from divorce claims and lawsuits filed against your children. If you are leaving assets to your children, why not protect them?

It also names the person you want to make health care decisions for you if you can’t. Doctors and hospitals need to know who is authorized to make decisions for you.

The documents typically included in an estate plan are:

Will

Durable Power of Attorney

Health Care Directive and Medical Privacy Act Authorization (aka HIPAA)

If you have a Revocable Living Trust, the documents will also include:

Certification of Trust

Transfer Deed to transfer your home to your trust

Schedule of Trust Property

Personal Property Memorandum

Next in the series is Part 2 Who Needs an Estate Plan.

Vacation Planning

School is out or almost out and you may have lined up a vacation or two.

Now is a good time to check to see if you have a plan in place to protect your family if something happens to you. Do you have enough life insurance for your spouse and children to make ends meet if something happens to you? Have you done a will to name guardians to raise your children if something happens to you and your spouse? Have you done a living trust to make sure your assets go where you want them to go in an easy and cost effective way – without probate? And if you have done a will and living trust, are they up to date? Are you still ok with the person you named five years ago to raise your children?

Estate planning doesn’t have to be a downer. It can be done quickly and simply, and you will feel good when you finish, knowing you’ve protected your family.