Law News and Tips
Fred Vilbig - Thursday, January 19, 2017
I recently met with a young couple regarding their estate planning. All things considered (including life insurance), they had a fairly good-sized estate. The problem as with many young families was the cash flow. It was already called for - every last cent - and there was nothing left for extras. Although they knew that they needed to protect their kids in the event of their deaths, they felt that a trust was a luxury. We talked about wills.
Although I’ve talked about wills in prior posts, I want to return to the topic. I think there are a number of families (particularly young couples with children) who know they need to do some planning, but a trust is just too much. They are comfortable with a simpler, less expensive plan, notwithstanding the benefits of a trust. Why buy a Rolls-Royce when a Honda will cover your needs. So I want to talk about two important things parents can do with a will.
When young children are involved, one of the main questions is, “Who will get the kids?” If you leave it up to the probate court, it may be a family member (but maybe not the one you want). Or they could end up in foster care. With a will, you get to say who you want to be the guardians of your children.
Then there’s the question of who will manage the money. The minor children can’t live in the house alone, so it will have to be sold. And most families have some life insurance. Minor children can’t open a bank account, and do you really want an 18-year-old to get control of a few hundred thousand dollars? If you don’t plan, the money may go into a conservatorship to be managed by the public administrator. He can only invest in secure investments like CDs and money market funds. These investments don’t even keep up with inflation.
With a will, you can provide that the cash will go into a trust to be managed by someone you trust. They can make reasonable investments and use the money for the benefit of your children. It’s a better plan.
So even if cash is short, it makes sense to do some simple planning. Otherwise, problems loom in the future.
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