If you’re a young parent, estate planning might be the one thing that you’re most neglecting these days.
The problem? Only 22% of Millennials have a will. That means the majority of young families don’t have any plan in place if something were to happen to them.
That’s scary.
If you’re not properly planning for your estate, you’re leaving your children’s future entirely up to chance. But, there’s good news.
Getting started is easier than you think.
Here’s what you need to know about estate planning as a young family:
- Why young families can’t afford to wait.
- The four essential estate planning documents you need.
- Choosing guardians for your children and why it matters.
- Common estate planning mistakes made by young parents.
Young Families Can’t Afford To Wait
I’ll be blunt with you here…
If you have young children and no estate plan, you’re playing Russian roulette with their future.
Here’s why: Without a will or trust, you’re letting the state make decisions for your children and your assets. If you pass without a plan in place, a judge you’ve never met is going to decide who raises your kids and who gets what.
Not your parents. Not your best friend. Not the next-door neighbor. Someone the court assigns.
Working with a team of experienced Knoxville estate planning attorneys is the only way to protect your children according to your wishes. Estate planning lawyers will help you craft legally-binding documents that secure your family’s future while working with your budget.
Most young parents think of estate planning as something they’ll “get to later.” In fact, 43% of Americans say they just haven’t gotten around to it yet. But later might be too late.
Estate planning isn’t about being morbid. It’s about being a responsible parent who plans ahead.
The Four Essential Estate Planning Documents You Need
Estate planning sounds like a scary, expensive process. The truth is it’s really just four basic estate planning documents that every young family needs:
A Will (Your Foundation)
Your will is the simplest of the estate planning documents. It’s the starting place that tells everyone what happens to your assets – and, more importantly, who takes care of your children.
Without a will, you have no plan at all. Your state’s intestacy laws (surprise! There’s an official name for it) will determine what happens to your kids and your assets.
Not ideal.
A well-crafted will lets you name guardians for your minor children, choose who gets what from your estate, and appoint an executor to manage your affairs. It’s the most important document you can create as a young parent.
Trusts (For Extra Protection)
Trusts sound like something only high earners and celebrities need, right? Wrong.
Trusts are an extremely useful tool for young families who want to protect their children.
With a trust, you can control how your children receive their inheritance from you. You set the rules, like “only access their funds after age 25” or “money can only be used for education, not vacations.”
The best part? Trusts help your family avoid probate court so they can access their funds much faster than they otherwise would.
Healthcare Directive (Your Medical Wishes)
A healthcare directive – also known as a living will – is a document that states your preferences for medical treatment if you become incapacitated or are unable to make decisions for yourself.
Do you want life support? For how long? If you can’t decide for yourself, who makes that decision on your behalf?
I’m not going to pretend these are fun questions to think about. But putting these decisions in writing now will spare your family a huge guessing game during what will already be a traumatic time.
Power Of Attorney (Financial Protection)
A power of attorney is a document that gives someone you trust the ability to act on your behalf for financial decisions if you become incapacitated or unable to manage your own affairs.
This could happen because of a serious accident, an extended hospital stay, or just about any circumstance where you’re unable to handle your own business.
Without a power of attorney, your family might have to petition the court just to pay your bills or access your financial accounts.
Choosing Guardians For Your Children (And Why It Matters)
If there’s one part of estate planning that most parents dread, it’s naming a guardian for their children.
Here’s some data to chew on…
Fewer than 7% of estate plan creators actually name a guardian for their young children.
Why is that so important?
Without a named guardian, a court will choose who takes care of your kids. It might be someone you trust. It might be a family friend. It could also be someone you would have never chosen in a million years.
When selecting guardians, consider these questions:
- Values – Do they have similar values and parenting philosophies?
- Stability – Are they financially and emotionally stable enough to raise your children?
- Age – Will they be able to care for your children into their late teens and beyond?
- Willingness – Have you asked them if they’re willing to take on the responsibility?
Don’t assume your parents or siblings will automatically step in to raise your children if something happens to you. Make it official and name them as guardians in your will. Name back-up guardians too, just in case.
Protecting Your Family’s Financial Future
Protecting your family’s financial well-being is another important piece of the estate planning puzzle.
Life insurance is not optional
Life insurance is not optional for young families. If something happens to you, does your family have a plan to maintain their lifestyle, pay the bills, put food on the table, and send your kids to college?
Life insurance provides a critical financial safety net that replaces your income when your family needs it most. A general rule of thumb is 10-15x your annual salary.
Update Your Beneficiaries
I see this all the time…
People create retirement accounts and life insurance policies, name beneficiaries, and then never update them. Ever.
Got married? Have kids? Got divorced? Changed jobs? Review your beneficiaries on all life insurance policies, retirement accounts, bank accounts, and investment accounts at least once a year.
Common Mistakes Young Parents Make
Let’s look at what NOT to do…
Waiting Until It’s Too Late
The biggest mistake is no plan at all. Shockingly, 55% of Americans have no estate plan whatsoever, leaving their families completely vulnerable and unprotected.
The size of your bank account has nothing to do with needing estate planning. If you have children, you need an estate plan. Period.
DIY Documents That Don’t Hold Up
Online template wills sound like an easy, cheap way to get started. But they can create major headaches and problems later.
Estate planning laws are different in each state. A generic, off-the-shelf template might not meet your state’s legal requirements, which means it could be tossed out in court when your family needs it most.
Not Discussing Plans With Family
Your estate plan isn’t a secret. Tell your chosen guardians what their role is. Make sure your executor knows where to find important documents.
Talk to your family about your wishes. It’ll prevent confusion and conflict later.
Forgetting To Update Your Plan
Life changes. Your estate plan should change with it.
New child? Update your plan. Bought a house? Update your plan. Got divorced? Definitely update your plan.
Review your estate planning documents every 3-5 years, or whenever you experience a major life change.
Your Next Steps Start Today
Estate planning for young families doesn’t have to be a daunting, overwhelming task. Start simple: create a will, name guardians, get life insurance, and designate beneficiaries.
Then work with qualified estate planning attorneys to create a comprehensive plan that will evolve as your family grows.
Trust me, the peace of mind you’ll gain from knowing your children are protected is priceless.
Don’t wait until “someday” to protect your family’s future. Your children are counting on you to plan ahead.
