A Family with Young Children Should Have a Comprehensive Protection Plan

If you have young children, you should put together your Comprehensive Family Protection Plan.  A will is simply not enough.  You need to ensure that you have appointed a guardian for your children, should you meet your untimely demise, and given instructions to all of your loved ones on how to proceed.

I go into more detail on exactly what you Comprehensive Family Protection Plan should look like in this article.

Make an appointment now so we can discuss how best to protect your family.

By:  William J. Kovatch, Jr.
(703) 837-8832
info@kovatchelderlaw.com

Why Parents Need an Estate Plan

Everybody should have an estate plan. But, planning is critical for parents with minor children. Surely, one of the things a new parent does is to make sure that they have life insurance to protect their young ones. Well, think of an estate plan as an extension of that life insurance.

First, and most important, every parent should think about whom they would want to raise their children if the parents were gone. This is by far the hardest thing for any parent to think about. But, it is the most critical. You don't want your children to find themselves the wards of the court. Court battles can be messy, and can take time. Meanwhile, the children may need to be in foster care until the case can be completed and a new guardian appointed. You want to make sure that you decide who is going to raise them. Plus, in Virginia, this step is easy to do. Appointing a standby guardian who can act immediately upon an emergency is a simple act of completing a one page document.

Once you know who could be taking care of your children, you need to give them the tools. In this regard, note that leaving a large sum of money to a minor directly is a bad thing. If no one is named as custodian, then there will have to be proceedings to name a guardian of the estate. This includes the appointment of a guardian ad litem to investigate the case. In Fairfax County, I've noticed that not all guardians ad litem understand the law completely and may insist that the money left to a minor, including insurance proceeds, be deposited with the court until the minor reaches eighteen. Plus, we have the added problem that under the law, any money left to a minor directly becomes the minor's money at age eighteen with no strings attached. How many eighteen year olds who you know are responsible to manage thousands of dollars given to them all at once?

The simple and most flexible solution is a living trust, either naming the potential guardian as the contingent trustee to take over after the parents' deaths, or naming another responsible person as the contingent trustee with instructions to cooperate with the potential guardian. Naming the trust as the beneficiary of life insurance proceeds should both parents pass is one way to make sure that all of the money is managed in a single, simple plan.

The point is that all of this is simple to create. It takes just a few meetings with a lawyer to plan, and some thought on the part of the parent. But, for a parent, it is one of the most critical things you can do to protect your children.

Giving a Gift to a Minor Through Your Estate Plan

Whether to a child, a grandchild, a special niece or nephew, many people wish to give gifts to minors through their estate plan. It can be accomplished through a will, a trust, a life insurance policy, or even by naming a beneficiary on a retirement account. Making the gift correctly can avoid a lot of hassle.

In this article, I am not addressing the tax implications through the estate tax, the gift tax or the general skipping transfer tax. I am only addressing the mechanics of how the transfer is made.

Many states, like Virginia, have the Uniform Transfer to Minors Act. If a minor is the beneficiary of a gift from a will, trust, insurance policy or other source, then the gift-giver has the power to appoint a custodian. The custodian then has the authority to hold the gift for the minor until the minor reaches 18, and use the money for the minor’s benefit.

If the gift-giver fails to name a custodian, then this can create problems. In Virginia, the person who wants to hold the property for the minor must then petition the court to be appointed the guardian of the estate of the minor. This is true, even if that person is the minor’s custodial parent. The guardian of the estate must post a bond with surety, and then comes under the supervision of the Commissioner of Accounts. Before using the money for the minor’s support, the guardian of the estate must consider all other sources of income or support for the minor. Generally, this means that the money cannot be used until the minor reaches the age of eighteen. As you can see, the need to go to court and the supervision afterwards creates a hassle and expense.

Other options in this situation can be for the Commissioner of Accounts to hold the money in an interest bearing account until the minor reaches the age of eighteen. Or, if insurance proceeds, the insurance company can hold the money until the minor reaches the age of 18.

Nonetheless, these options all leave something to be desired. It involves giving up control, and/or accepting court supervision.

The way to solve that problem is by leaving the gift through a well crafted trust. By creating a trust, the gift giver can define how the money is to be used, and when the money is to be turned over the to minor. For example, the trust can provide that the money can be used at the discretion of the trustee for the minor’s expenses. The money need not be turned over when the minor reaches age 18. Rather, if there is a concern that the minor would not be responsible enough, then the money can continue to be held in trust until the beneficiary reaches a suitable age, as defined by the gift-giver. Moreover, if the minor is disabled, as defined by Social Security law, then the trust can and should be drafted in such a way so as to avoid disqualifying the beneficiary from government benefits.

Gifts to minors through an estate plan are usually best made through a trust. For advice on how to craft such a trust to suit your specific needs and desires, call me at (703) 837-8832.

Young Families Need a Good Plan

Estate planning is not just for more established people, who want to direct who gets their money. Families with young children have special reasons to plan. Parents need to plan to make sure that their children are protected and cared for.

Your estate plan is not just about money. You can name whom you want to act as the guardian of your minor children should you meet an early demise. This avoids leaving the decision entirely to a judge who knows nothing about you. Your estate plan can include instructions to your child's guardian on how you would want your children raised, and what values are important to you.

For a young family, a good estate plan should also include a method to manage money until the child reaches an age when he or she can be more responsible. This is often done through a trust, which can act as the beneficiary for insurance policies and retirement accounts. You can appoint a trusted person to manage the money, and instruct that person to cooperate with your child's guardian.

Young families should contact an attorney early, and make sure that their children are protected.