Have you considered what would happen to your children in the event of your disability or death?
It is a hard subject to think about, but accidents do happen. When you least expect it, life can throw you an unexpected curve ball. We are surrounded with potential risks in our daily lives: driving to work, flying to meetings or vacations, riding a bike to the store and even just crossing the street. Tragedy can strike us at any time and when we have minor children, there is more at stake then just our own lives.
Have you ever thought about what would happen if a tragedy occurred in your family and your children are orphaned? If you don’t have an estate plan, your children’s guardians and the distribution of your assets will be determined through the courts. This can lead to lengthy and costly legal issues that your extended family will have to deal with… and even the possibility of law suits filed between your own family members to determine who will be the children’s guardians!
Who would you appoint to serve as back-up parents and raise your children if you could not do it yourself? Your answer to this question will likely depend on how your family is structured and defined. Some families are formed by a first marriage and are straightforward; some families are formed by second marriages where one or both spouses bring children into the marriage; and some families are defined by a single parent. Each type of family has its own set of considerations.
If your family was formed by a first marriage, you should consider what will happen if both parents pass away unexpectedly.
Which side of the family will take over your parenting duties - the paternal or maternal side? Do both sides of the family get along well? You may choose to ask a friend who you would trust to raise your children with values similar to your own to be the guardian? How would the families react to your decision? These are some very important issues to consider in advance in your estate plan.
Maybe your family is not so simple… If you are part of a family where at least one spouse has been previously married, you are in the majority. Most families fall into this category these days. Your minor children may be biologically related to the mom, the dad or both – and this makes planning a bit more complex. In many cases, the children consider themselves to be “one big family”, however if something happens to mom and/or dad, the biological parents will be in the mix. In this case, how would you go about picking guardians for your children? How can you make sure that the children will all keep in touch regularly? Again, these are crucial questions that need to be considered by you in an estate plan as responsible and loving parents.
You single parents may be thinking that things are much easier for you… Well yes and no. If a single parent is struck by tragedy, the surviving biological parent will automatically become the guardian of the children, unless it is proven that he/she is not fit. If you don’t have an estate plan, it is highly likely that the courts will assign the surviving biological parent to manage the inheritance that is left by you to your children. This may not be the outcome that you would choose yourself, would it? If both you and the other biological parent are deceased, without proper legal plans, a judge will select the guardians for your minor children and see that the inheritance is distributed in a lump sum to the children when they turn 18 years old.
This brings up another important consideration. How should the inheritance be distributed to your children? If you don’t have an estate plan, California law dictates outright distribution of the entire inheritance to a child who is 18 years old or older. Children who are under 18 will receive their inheritance in a lump sum when they turn 18. This lump sum distribution is not usually in the best interest of the children - can you imagine what an 18 year old child would do with tens or hundreds of thousands of dollars? On average, lump sum inheritances like this are spent within 18 months of distribution. It may be a better choice to create distribution “triggers” using provisions in a Living Trust. You may want to set up a separate Lifetime Trust (also known as a Heritage Trust) to manage distributions. You may use any means that you want to – some parents make the inheritance become available at predetermined ages, or at other milestones, such as graduating from high school or college. If you use a trust, it is purely up to you to decide.
As you can see, trust planning offers tremendous flexibility and control over guardianship and distribution of assets to minor children. We can help you put a great plan in place for your peace of mind…
Call our office at (408) 244-5754 to speak to an attorney