29 Nov How to Use Estate Planning to Protect Your Children

Planning for your family’s future isn’t always easy, especially when you have to consider all the “what-ifs.” One of the most meaningful ways you can protect your children is setting up an estate plan that reflects your wishes for their care and provides for their financial security. 

Estate planning isn’t just for the wealthy—it’s for anyone who wants peace of mind knowing their children will be safe and provided for. Here’s how you can use estate planning to protect your children in case the unexpected happens.

Step 1: Appoint a Guardian in Your Will

Naming a guardian for your children is one of the most critical aspects of estate planning for parents of young children. If you’re a single parent, this step is especially important. Without a guardian specified in your will, the court will end up making this decision for you. Obviously, you want a say in who has the care of your child, so don’t put off this very important step.

When appointing a guardian, choose someone whose values align with your parenting style and who also has the emotional and financial stability to provide a nurturing home. Talk with your chosen guardian beforehand, to be sure they’re willing to accept the responsibility and that they fully understand your expectations. 

Step 2: Set Up a Trust for Financial Security

Trusts are a powerful tool you can use to protect your children’s financial future. With a trust, you get control over when and how your children receive their inheritance, preventing a large sum from falling into their hands before they’re ready.

• A revocable living trust allows you to maintain control over your assets during your lifetime. You can specify the amount and timing of distributions, and the funds will be managed by a trustee until your children come of age. A revocable trust also keeps your assets out of probate, so your children get the most out of their inheritance.

• A special needs trust is designed for families with children who need long-term care and support. A carefully structured trust will protect your child’s inheritance, ensuring that they are always cared for. You can also use a special needs trust to make sure financial resources are available to support your childe without jeopardizing their eligibility for government benefits. 

Establish Clear Distribution Guidelines

If your children are under 18, they can’t inherit money directly. In the event of your death, a court-appointed guardian would manage any funds you leave behind—unnless you have a trust. By setting up clear distribution guidelines, you can allocate specific amounts toward education, health care, or other needs as they grow. 

You can also set age-based milestones for distributions, so that your children are financially mature when they receive significant portions of their inheritance. For instance, you might choose to distribute funds at ages 25, 30, and 35, or take extra steps to protect their inheritance from future spouses or creditors.

Select a Responsible Trustee

When you set up a trust, you also need to choose a successor trustee. This person will be responsible for managing the trust’s assets on behalf of your children. Choose someone you trust, who you know will act in your children’s best interests, who understands your values and is financially savvy. If you prefer a more professional option, you could also consider appointing a corporate trustee, such as a bank or trust company.

Step 3: Consider Appointing a Power of Attorney

In the event of an emergency, who will have the authority to make healthcare decisions for you or your children? A medical power of attorney gives your personal representative the right to make decisions about your healthcare if you are ever incapacitated. And a health care power of attorney for minor children allows you to designate a trusted adult to make medical decisions on their behalf if you’re unable to do so.

This is particularly important if you’ll be traveling without your children or if a guardian might need temporary decision-making authority. By outlining your wishes in advance, you ensure that someone you trust has the ability to act quickly in a medical emergency.

Step 4: Name Beneficiaries and Update Your Estate Plan Regularly

Assets like life insurance policies, retirement accounts, and investment accounts all have designated beneficiaries. Make sure you update these designations whenever there are significant life changes, like the birth of another child, a marriage, or a divorce. You can also assign beneficiaries for bank accounts, vehicle titles, and more, keeping those assets out of probate.

Life changes, and your estate plan needs to evolve along with it. Whether you change careers, move to a new state, or welcome new family members, you may need to make a few updates from time to time. Meet with your estate planning attorney periodically to review your plan and make revisions if necessary.

Creating Peace of Mind for Your Family’s Future

Setting up an estate plan is one of the most meaningful steps you can take as a parent of young children. As a family practice with generations of experience, we understand that every family has different needs and goals. The team at Phelps LaClair will help you set up a personalized estate plan that protects your children and gives you peace of mind. 

With seven locations across the greater Phoenix area, we’re available to meet with you in person and answer all of your questions. Contact us today to schedule a free consultation, and start planning for your children’s future with confidence. 

​​Photo by Jessica Rockowitz on Unsplash used with permission under the Creative Commons license for commercial use 11/29/24.