Having figured out what estate planning “is” in my previous post, let’s move on to why estate planning is important. Because the topic is so broad, I’m going to break it down and address it based on common life stages. If you are curious how it applies to YOU, contact me and let’s talk about it.
Let’s start by looking at how critically important estate planning is for parents with kids under 18 years old. It really doesn’t matter if all or some of your children are under 18. These important issues apply if any of them is under 18:
- Establish guardianship for your children under 18 – not doing so will leave their care up to a court to decide. Someone who doesn’t know you and what’s important to you, your family dynamics, and your desires for your children’s future, will be the one making the decision who will raise them.
- Establish temporary guardianship for your children – not doing so could leave them in the hands of child protective services or temporary/permanent foster care.
- Make sure you have a comprehensive protection plan for your children so your babysitter, family, friends and guardians/temporary guardians know what to do if something happens to you and have the legal documentation to prove it. We include instructions for these important people and even include a family emergency ID card for your wallet/purse.
- Have your estate structured so your kids don’t succumb to “lottery winner syndrome” when they receive all of their inheritance outright at 18 years old. Think about that for a second. Let’s take an example: 2 children and an estate valued at $500,000 (and remember life insurance is included in the amount they receive). Each child will receive whatever amount of their $250,000 share is not used up by the time they are 18. Can you imagine? Let’s say that ends up being $100,000. How would you have handled $100,000 when you were 18? I know how I would have handled it and it’s not pretty. I read one study that said over half of outright inheritances are spent within 3 years of receiving them – no matter how much was received.
- If you are a professional and subject to potential liability, make sure you structure your plan in a way that ensures your assets are there to benefit your kids and not lost to lawsuits, creditors and other liabilities.
- Make sure you pass on your “whole family wealth,” not just your money. This includes your values, insights, stories and experiences – who you are and what is important to you. In my experience this is THE most overlooked part of estate planning. It happens to be one of the most fulfilling privileges I have when working with families.
- Have a health care directive (patient advocate designation) in place for yourself and your children to minimize conflict about your medical care.
These are just a few of the reasons families with kids under 18 need an estate plan. Can you think of more? Please share your thoughts and experiences.
With my next post in the series, I will look at why planning is vital for “professionals” – and you may be surprised how many families are in that group.
Michael Lichterman is an attorney specializing in estate planning and helping provide peace of mind to families and businesses in Grand Rapids, Grandville, Cascade, Forest Hills, Ada, Byron Center, Caledonia, and the surrounding areas. He specializes in “whole family wealth” planning for professionals with minor children, doctors, nurses, lawyers, and the “sandwich generation” (caring for parents and children) – and does so from a Christian perspective. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.