For many young couples, estate planning can be a topic that slips through the cracks or is seen as something reserved for retirees and the elderly. Then, something tragic happens and a spouse or other family member may be forced to make tough decisions under duress, because they are completely unprepared for making end of life decisions.
We think we are invincible as young people, so we tend to put things like wills or trusts out of our minds until we actually experience the death of a loved one and are then forced to deal with the often complicated task of making a person’s final decisions for them.
It’s a no-win situation for the deceased or the family members involved, because no one wants to be the one to have to decide what they think their relative would have wanted.
In this post, I’ll describe some key things for families that often get overlooked when discussing end of life plans. I’ll also touch on why creating an estate plan early on is especially important for young families.
Planning ahead for incapacity
Incapacity is becoming much more common than a person just passing early on in life. This is why choosing an incapacity panel of around three trusted people is something important to consider in order to avoid the potential of the deceased person’s estate going to court for a judge to make a decision on. If this happens, a doctor must also be hired to help determine a person’s state of mental health and ability to make sound decisions. This is why estate planning is so important, to avoid these types of situations.
Power of attorney
There are actually different types of POA – those pertaining to financial and business-related decisions as well as those that help determine which medical decisions can be made by someone else of your choosing on your behalf. Traditionally, a Power of Attorney can expire or be canceled due to death, expiration, or mental incompetency, so this is why the concept of the Durable Power of Attorney was created, so that your POA stays in effect even if you pass on or become mentally unable to make sound decisions for yourself.
Life insurance stipulations often get overlooked
Many parents list the spouse as their main beneficiary with young children listed as secondary, which can actually trigger a guardianship if the children are under age 18. Guardianships can potentially cost upwards of $10,000 per year just to maintain. A court will also step in and supervise any guardianships, and when the children involved turn 18, they have the potential to gain access to large sums of money before they are responsible and ready enough to handle it.
I recommend to my clients to appoint a trustee who can manage life insurance funds until a child reaches a more mature age, such as 25, before they are allowed access to life insurance funds. Minors in Texas are also not allowed to inherit property outright, so this can create another issue if properties are designated on a will as part of a child’s inheritance, rather than a trustee.
A will on its own may not be enough
In Texas, a will can be as simple as a person writing down what they’d like to leave to their family member(s) on a piece of paper as long as it’s signed and dated, but there are several other types of documents to consider when creating a thorough will. Basic wills usually aren’t detailed enough to cover things like life insurance and planning for incapacity or other important medical decisions, like a do-not-resuscitate order or assigned guardianship of children or property. A trust can offer more designation of assets options and freedom than a will can, but it must be maintained and funded throughout its lifespan to be considered valid.
When starting a family, there is so much to consider when it comes to estate planning. I am happy to offer free consultations through my law practice, and I work closely with families to help them understand the process and ensure that everyone is protected. After all, your family truly is your most important asset.