Leaving money for your children

While I’m sure your children are wonderful, self-cleaning, and obedient at all times, they still cost money to raise.  A lot of money.  Ensuring your children’s financial needs are provided for in the event of your death is a major concern for most parents.  Life Insurance is a generally a relatively inexpensive way to protect your children’s future.  How much insurance you need depends on a number of factors.  I would recommend that if you and/or your spouse don’t have life insurance or are unsure if it would be sufficient to support your children into adulthood (and possibly through college), you consult a financial planner.  If you don’t already have one, might I recommend Karen Groves at Thrivent Financial in Burnsville.  She did a great job for me and treated me like I was an important client, even though I’m sure my term life policy was hardly worth the time she and her associate, Elizabeth McCray, put into it.  They even researched law school scholarships for me when I admitted that I hadn’t applied for any!  Now that’s personal service.

Even if you have life insurance or other assets, you still need a way to pass them to your children.  We’ll discuss choosing a Property Guardian (PG) in the next post, so let’s just pretend that you already have someone picked out to manage your children’s finances.

If you’re a very trusting person, you can name a PG for your children and leave no further instruction as to how the money should be spent.  The PG will manage the money until the child is a legal adult (18 in MN).   Once the child reaches 18, they get it all with no supervision or strings attached. *shudder*

A slightly more restrictive tool is to pass money through the Uniform Transfers to Minors Act (UTMA).  The age of majority under this act is set by state law—age 21 in Minnesota.  That would give your child three more years to mature before receiving a sizable sum of cash.  Again, the individual you choose to serve as PG would control the money until the child reaches 21 and the powers of the PG under the UTMA are set by state law. 

If you would like to have more control over when, how and for what purpose your children receive financial support, then a trust (or trusts) are a better choice for you.  Although they do cost more to set up, they provide tremendous flexibility and can be customized to meet the needs of each child.  You can set one trust for all of the children to draw from or separate trusts for each child and the trusts can last until a set age, until the last child dies, or any point in between. 

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Choosing the right guardians for your children

Choosing someone to raise your children in your place can be a gut wrenching decision.  No one can raise your children exactly as you would.  There is no perfect choice.  The best choice today may not be the best choice in ten years.  Do not allow the fact that there is no perfect choice prevent you from making a “best-under-the-circumstances” choice.  Your choice—based on your love for your children and understanding of their needs and personality—is still better than the court’s choice.  Don’t forget, you can always make changes to your will as your situation changes.

Once you have narrowed down your choices, you should speak with each of the individuals/couples to see if they would be willing to take on this responsibility in the remote chance that both parents pass away while your children are minors.  You should have at least two alternates in case your first choice is unable or unwilling to look after your children.

Special Note for Single Parents:  In all likelihood, your child’s other parent will get custody should you pass away.  It is extremely difficult to deny custody to the still-living parent.  However, you should still name a guardian as your child’s other parent may predecease you. 

If you do not have an obvious choice or you and your partner can’t agree on who should be named guardian, then consider making a list of the traits that are important to you and then rating them on a scale of 1-5 based on “would like” vs. “must have”.  Each parent should do this exercise separately.  Once you know which traits are most important to each of you, you can better compare the strengths of each of your choices. 

Remember:  there is no perfect choice.  You are also not limited to one guardian for all of your children.  In some circumstances it may work best to have children go to separate guardians based on their unique needs or personality.   To help you get started, here are some traits that you may want your child’s potential guardian to have:

·         Love your children/Your children love them

·         Live in the same school district

·         Have children the same age/Don’t have children

·         Could take the family pet/They don’t have pets (allergies)

·         Family members/Not part of your immediate family

·         Older/Younger

·         Would be willing to move into your home/have space in their home

·         Can handle your child’s medical/emotional needs

·         Share your religious beliefs

·         Share your educational beliefs

·         Share your parenting style

·         Are financially stable

·         Single/married—do you want to name an individual in case the couple divorces or would either spouse be a good single parent?  Do you only want your child to go to an intact family?

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Wills: They're Not Just for Old People Anymore!

Wills are like losing weight.  We know it’s something we should do, but dang it's sure hard to get started!  I’m right there with ya.  I have a confession to make.  I don’t have a will. *gasp*  You’d be surprised how many lawyers don’t have wills.  The professor who taught my wills class also didn’t have a will—even though she is a lesbian in a committed relationship with children!

To be fair, it’s not only the effort of making a will that keeps us on the couch.  What keeps me from writing my will is having to imagine a situation where I won’t be around to watch my daughter grow up.    Despite my knowledge to the contrary, it feels  as though simply contemplating the possibility of my untimely death is enough to make it more likely.  I felt the same way before I purchased life insurance.   Based on that experience, I can tell you that I felt a tremendous sense of relief knowing my daughter would be provided for if I were to die unexpectedly.

When you’re young, single, and childless you may be comfortable allowing the state’s intestate statute govern your estate distribution.  Once you have children, you may not be comfortable leaving their future up to chance.  Who would you want to raise your children if you and your spouse/co-parent die?  How would you want to provide for your children’s care and support?  Who do you want responsible for managing their finances until they are adults? 

It can feel overwhelming to address all of these estate planning concerns at once.  Breaking the process into smaller chunks makes it manageable.  

Over the next few weeks, I will be posting some exercises to help you gather the information and reflect on the important choices you will need to make when writing a will.  The initial posts will focus on the needs of families with young children and later posts will be useful to people in any stage of life.  Please feel free to contact me if you would like to see other topics covered and I will do my best to accommodate your request. 

Let's commit to giving ourselves and our children the peace of mind of having an emergency back-up plan in place by the end of 2011.  Consider it the Year of The Will.  As a bonus, you can do most of the work while in your PJs laying on the couch.  That's an offer Lifetime Fitness just can't beat!

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