Benjamin Beck, CFP®From buying the safest car seats to planning for college, you want to provide the best of everything for your children.
But, have you also considered making a plan to provide them with a successful future? Here are a few important tools to help you get there.
A Living Trust vs. Will
Financial family planning starts by deciding whether a living trust or will is most effective to make sure your children are taken care of after you’re gone. When comparing a living trust vs. will, remember they serve two different purposes and you could have both.
What Is a Will?
A will is a legal document used to deliver your instructions regarding your children and all assets after your death.
A will does the following:
- Names guardians for your children.
- Lays out instructions for final arrangements.
- Leaves assets to designated beneficiaries at one time upon death.
- Goes into effect after your death.
- Goes through the probate process.
Having a well-executed will can make the probate process a bit easier, but because it goes through the courts, it will become a public record, meaning that anyone can view it. Making amendments is pretty straightforward, but does require witnesses.
What Is a Living Trust?
A living trust is an in-depth legal document that gives ownership of your assets to the trust and is effective upon signing. Although there is a stereotype that a trust is only for the wealthy, it can be used by anyone and it can give you more control over how assets are handled and distributed.
A living trust does the following:
- Uses an appointed trustee to manage and distribute assets after your death.
- Does not need a probate process.
- Allows control over how and when your beneficiaries receive your assets.
- Is harder to be successfully challenged or contested than a will.
- Protects assets from being seized by creditors.
- Does not name guardians for children.
Depending on your financial situation and other factors, a trust can be more complex than a will. For example, trusts can minimize certain taxes, such as estate planning, and have unique attributes, such as an irrevocable living trust, which protects assets from being seized by creditors.
However, a trust also allows for flexibility. You can stagger how much money your beneficiaries will receive and when they receive those assets. Additionally, you can shield the contents of your trust from the public since it avoids the probate process.
Life Insurance
Do you need to consider life insurance while diving into financial family planning? The answer is usually yes, but most people don’t think about life insurance until after they have children. Then the question becomes, “How much do I need?”
Before you go out and buy the first policy you can find, stop and remember the steps for any successful decision making.
Always define your objectives. For example, if your children are under 18, you want them to be financially provided for until they turn 18. After this turning point, you may want their college paid for and for them to have the ability to pay off your mortgage, other assets, and any liabilities.
Ideally, defining your objectives for getting life insurance happens as part of your family financial plan — and should not be forgotten or procrastinated. At a minimum, you need to have a consultation with a financial advisor while your baby is still on the way.
Health Care Proxy
While a life insurance policy can protect your children from your debts and give them a good foundation, having a health care proxy can take the burden off your children if you should become severely ill or unable to make medical decisions.
A health care proxy is a legal document that expresses your medical preferences and appoints someone you choose to make decisions on your behalf when necessary. These decisions are often related to treatment options and palliative care.
Prioritize Financial Planning for Your Family
While having a financial plan is critical is always critical, it can become even more so when you begin growing your family.
A financial plan that includes considerations for your children’s future with and without you there can give you peace of mind now and give your loved ones the support they need later.
Schedule a Discovery Call today to begin creating a strategic financial plan that benefits your family for generations.