The majority of people associate estate planning with making arrangements for your death. However, estate planning is equally important to ensure that your family is taken care of if you are unable to take care of yourself. The inability to make decisions or care for oneself or a minor child is often referred to as incapacity. This is particularly relevant today, as COVID-19 has added a new element of uncertainty to our everyday lives. Given the many unknowns of our current situation, you need to have some peace of mind. Having an up-to-date estate plan can be the first step to providing you with some certainty.
Making Financial Preparations
A revocable living trust can be a great solution for managing financial needs during incapacity. This will allow you to name yourself as the trustee and continue to exercise control over the money and property held in your trust. A trustee is the person or institution charged with managing, investing, and handing out the money and property within a trust. A trust also allows you to name a co-trustee or an alternate trustee to seamlessly step in, without court involvement, during your incapacity, and manage the trust’s money and property for your benefit and the benefit of your named beneficiaries.
In addition, when using a trust, you can specify when and how the funds should be used for your minor child’s benefit. You can provide instructions for certain expenses to be paid during a period of incapacity to ensure that your minor children are still being provided for in the same way you would provide for them. Additionally, you can include a plan for how the money will be used upon your death. This can include your children receiving a specified percentage upon reaching a certain age.
You can also structure your child’s trust as an incentive trust to allow the trustee to give your child money only after they achieve certain goals (i.e., successfully completing post-secondary education, being sober for one year, marriage, birth of their first child). Alternatively, you can leave the decision of how and when to give out the funds exclusively up to the trustee’s discretion. This is sometimes referred to as a discretionary trust. Because your child will not be guaranteed a specific amount of money or piece of property, the funds will be better protected from any future creditors or a divorcing spouse that you child may have. However, when deciding to use a discretionary trust, it is important to choose your trustee wisely and provide clear guidelines for the trustee to consider.
Because you choose the trustee and determine how the money is to be managed and spent, you can rest assured that a former partner or less-than-desirable family member will not have the ability to spend your child’s money for their own benefit, even if one of these individuals ends up raising your child.
Lastly, an added benefit of utilizing a trust as part of your estate plan is avoiding the time-consuming and often expensive probate process that would otherwise be required. As long as you properly transfer your accounts and property to the trust, you will save your loved ones precious time and money during an emotional period.
Caring for your Minor Children
When planning for minor children, it is also important to consider who will act as the guardian of their person if you are unable to do so. If your minor child’s other legal parent is still alive and able to care for them, the other parent will continue to provide care or will assume the day-to-day responsibilities of the caregiver. Nevertheless, it is a good idea to plan for what will happen if both of you are unable to care for the minor child, just in case. If you are the only living parent, or if the other legal parent is unfit too care for your child, it is crucial that you make the proper arrangements.
While most people are familiar with the idea of naming a guardian for a minor child in a last will and testament, this document does not become effective until your death. Therefore, to properly plan for your child’s care during your incapacity, you need to consider naming a guardian in a separate document that meets the requirements of your state law.
Let Us Help You
Providing for your minor child’s care and financial security is an important undertaking with many important questions to consider. We are here to walk you through the process and help you answer those questions so that your minor child is cared for in the best way possible. Please give us a call today so we can begin your journey. We are available for virtual meetings.
Give Us a Call
Nielsen Law PLLC provides family focused estate planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information and to learn about our firm, please contact us.