| Dependent children require resources for health, | | | | health, education, maintenance or support needs, |
| maintenance, support and education. Some support is | | | | they may make a formal request to the acting |
| provided through guidance while other support | | | | trustee who says "yes" or "no", based on how they |
| requires money. Parents must provide both but what | | | | think you would have responded. |
| happens if the parents aren't there to provide either? | | | | It is this estate planner's opinion that even age 25 is |
| The first step is crucial: have reasonable life insurance. | | | | too young to receive money without any guidance |
| Could you imagine raising someone else's child if the | | | | because many children graduate from college at age |
| parents left no money? Most current statistics state | | | | 22 or 23. If a graduate knew in two years he or she |
| raising a child to the age of 18 costs $250,000. Costs | | | | would be receiving a decent sum of money, that child |
| are higher in the earlier years due to doctor visits, | | | | might not pursue and develop a career with the |
| diapers and daycare. On the back end, higher | | | | same intensity as a child not expecting to receive a |
| education could require additional money beyond age | | | | sum of money in the near future. |
| 18. | | | | Example: At age 30, beneficiaries can receive |
| Even if only one parent is gone can the remaining | | | | ¼ of their inheritance with no strings attached. |
| parent alone afford mortgage payments, taxes, | | | | At age 35, beneficiaries receive another ¼ and |
| utilities and the costs of raising children? | | | | perhaps the remainder at age 40. Hopefully if the |
| What would the quality of life be for the surviving | | | | first ¼ is spent recklessly, they will be wiser |
| parent? | | | | the second and third time around. |
| A family with one young child should consider having | | | | Trusts can also maintain a residence for children and |
| $500,000 in coverage. | | | | their appointed guardians until the children have |
| What are your life insurance options? Three common | | | | finished school. This is very appealing for parents |
| forms are term, universal and whole life. Universal and | | | | whose kids are entrenched in their school with their |
| whole life insurances are more expensive because | | | | friends and if potential guardians don't have a large |
| they never terminate if you properly pay your | | | | enough home without buying a new home. |
| premiums. Part of the premiums builds cash value, | | | | For beneficiaries with special needs who receive |
| which one can borrow against or withdraw. | | | | disability income, trusts can hold distributions to those |
| For many families term insurance is the best option | | | | specific beneficiaries to avoid a disruption in |
| because it is much cheaper and ends when needs for | | | | government assistance. |
| life insurance often diminish. It does not continue | | | | A Will can create a trust, called a Testamentary |
| indefinitely nor does it build any cash value. If the | | | | Trust, which forms after you pass. The downside to |
| term is 20 years, you pay the same premium for 20 | | | | Testamentary Trusts is they will not help your estate |
| years and after 20 years the policy ends. | | | | avoid the court process of probate, which is how the |
| How much does term insurance cost? $500,000 of | | | | state ensures the wishes of your Will are carried out |
| coverage for a healthy, non-smoking parent is often | | | | correctly and creditors are given an opportunity to |
| less than $40/month. | | | | make claims against your estate. |
| It's a good idea to have coverage on a stay-at-home | | | | Depending on the state you live in, probate can delay |
| spouse to help cover child-care costs and future | | | | the transfer of the estate by months or even years. |
| retirement earnings if that parent were to return to | | | | Quite often attorneys are hired to assist with the |
| work when dependent children are older. | | | | probate process, which can increase the overall cost |
| Step two is naming legal guardians for your children. | | | | of the process. |
| Otherwise a court is left to decide who will raise your | | | | A common and simple way to ensure any delay in |
| children. If you have a valid Will naming guardians, a | | | | your estate's transition is avoided is to create a |
| court still appoints your children's guardians but a | | | | Revocable Living Trust. Assets held by the trust |
| court will almost always honor your request unless a | | | | avoid probate and can be distributed immediately |
| valid reason is provided to the court to consider | | | | once all debts have been settled. Living Trusts |
| otherwise. | | | | typically come with a Will called a Pour Over Will, |
| In addition to naming guardians a last will and | | | | which will name the guardians for children. |
| testament can indicate distribution terms for your | | | | Living trusts can be found online or through an |
| assets and appoint people to handle your estate. Wills | | | | attorney. Costs average $500-$1500 though it's not |
| can be created online or by attorneys and can cost | | | | uncommon for attorneys to charge up to $5000 for |
| anywhere between $100-$1000, depending on the | | | | a living trust. |
| attorney, your state and the complexity of your | | | | Begin by contacting multiple insurance agents. |
| estate. | | | | Research estate planning online to understand the |
| The third step is creating a trust. While a will is just a | | | | basics and prepare yourself with questions for an |
| piece of paper with distribution and guardian | | | | estate planner. To find an estate planner ask for |
| instructions, a trust can be pictured as a box to hold | | | | referrals from family, friends, your insurance agent or |
| assets for beneficiaries long after the parents pass | | | | your financial adviser. If they have none to refer, a |
| until children are mature enough to manage money | | | | search on the Internet and a few phone calls should |
| (from the sale of a primary residence, life insurance | | | | help you find someone affordable. |
| and other assets). | | | | The most important thing to understand about |
| Some statistics show beneficiaries, regardless of age, | | | | estate planning is it is not a one-time event of signing |
| spend their inheritance within two years. With a trust, | | | | documents and feeling safe. It is a process that |
| beneficiaries can be forced to wait until | | | | periodically needs review and updating. Find a good |
| predetermined ages before receiving their inheritance. | | | | planner you can afford who will ensure the estate |
| If they need money prior to that age for reasonable | | | | planning process fulfills your needs. |