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Young couples with kids and the need for estate planning

Parents of minor children need an estate plan to take care of their affairs in the event of an unexpected death more than anyone. However, these parents are often the least likely demographic to meet with an attorney about creating an estate plan.

In addition to being young and feeling immortal, many parents are confident that, if something happens to them, their spouse will take care of the children. This is often true for most married couples, especially if the spouses have joint accounts and have named each other as beneficiaries of their life insurance policies and investment accounts. Divorced and second-marriage parents will need to decide who they trust to take care of their kids, both physically and financially. Additionally, parents should be aware that, if they do not have a will and have assets that don't have beneficiary designations, only a portion of those assets would go the spouse, with the rest going to the children.

The eventuality parents should be most concerned about is an accident that kills both parents simultaneously (i.e. the car crash). Who do the parents want to raise their kids? Who do the parents want to handle their kids' money?

If both parents are killed, the Court will appoint someone as Guardian to raise the minor kids. Anyone can "apply" for this job, even relatives that the parents wouldn't want raising their kids. However, parents can designate in their wills who they want to be named as guardian of their children, and North Carolina Law requires the courts to give "substantial weight" to a guardian recommendation contained in a parent's will.

What about the money? Many young couples assume they simply don't have enough assets to bother with an estate plan. If these parents don't have life insurance, they should probably get some. Even if there is no life insurance, most parents have some equity in cars and homes, own tangible personal property ("stuff"), and have some money in bank accounts and IRA's.

Money and "stuff" can't simply be given to a minor. If there is no estate plan, the Court will appoint a Guardian of the Estate for each child. This Guardian of the Estate will have to be bonded every year and file yearly reports with the Clerk of Court, the costs of which usually come from the child's money. The Guardian of the Estate will also be required to file a motion with the Court to get pre-approval from the Clerk of Court prior to using the child's assets. When the child eventually turns 18, that child then gets a check for all of the remaining money to do with as the child pleases. If there was life insurance, this check could easily be quite large. How responsible should parents expect their parentless-children to be at 18?

So what do parents of minor children need? At a bare minimum, parents should have wills containing testamentary trusts for the benefit of the children in the event something happens to both parents. This document will name who the parents want to raise their kids, appoint the person(s) who will be in charge of the money that will be put in a trust for the kids' benefit, and designate when the kids will be able to get the remainder of trust (i.e. at age 30 instead of at age 18). Other documents parents should also have include Powers of Attorney, Health Care Powers of Attorney, Living Wills, and Health Care Powers of Attorneys for the kids (if the parents ever leave the kids with Grandma and go on a vacation).

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