We all know that estate planning is important, even if for many of us it is low on our to-do list. But, estate planning should be at the top of that to-do list after you have kids.
Why does it become more important after kids?
To put it bluntly, it is because your children rely on you for everything, and should you and your spouse pass without an estate plan, they are left to the whims of a family court judge. That judge does not know you or care about your kids, other than a general sense of duty or care. This could mean that your kids will fall into the New Jersey foster system, at least until someone in your family steps up.
The first issue that should be addressed in your estate plan is the custody of your children. This means naming a guardian, the person who will step in as the parent, should you and your spouse pass. The guardian will have all the rights and responsibilities of a parent. Be sure to have a list of guardians too because naming just one may result in none. This is because that person may pre-decease you, change their mind or just not want to be a parent anymore. Have back-ups.
Next, think about how your child will be taken care of by the guardian. You do not want to put 100% of that financial responsibility on them because kids are expensive. Make sure you have life insurance set up that flows to a trust for the benefit of your children. Make sure that all of your accounts have a payable on death designation, and that designation should be your children’s trust.
Why a trust?
Setting up a trust can help avoid probate and its associated fees and costs. It can also add another layer of financial protection for your children because it puts a financial expert in charge of those funds to be managed for the benefit of your children. It also makes sense because it also avoids many of the taxes that can be associated with large transfers of assets.