Ahhhh…the youngest one is finally off to college. You’re now an Empty-Nester!
Seems like only yesterday you were cradling the little miracles in your arms, while the emotion welled up inside you.
There are, no doubt, a lot of things running through your mind during this time of transition. And your estate plan is probably not one of them. But it should be!
When your children were born, you probably designated guardians for them if anything should happen to you and your spouse. But, when they go off to college, that’s not enough anymore. Now, there’s a whole new range of things to consider. For example, what if you and/or your spouse pass on while the kids are still in college?
Kids being kids, there are some questions you need to ask yourself. For example, will they waste the money you’ve spent a lifetime working to save for them? Will they drop out of college? And will they be taken advantage of by scammers?
There are ways you can protect your children, even after you’re gone…
TRUSTS
Basically, there are two types of trusts – an inter vivos trust while you’re still around, and a testamentary trust for when you’re not.
Why consider a trust?
* Income can be distributed to your heirs over time, rather than all at once. For example, you can give your child 25% of their share when they hit 25. You could give another 25% when they’re 30. And you can give the rest when they’re 35, 40, 50, etc. The ages – and the percentages – are strictly up to you.
This option helps reduce the risk of your child leaving college and blowing the money on needless extravagances. And it reduces the risk of them showing up on scammers’ radar screens.
* Your child will still be able to access money for healthcare and educational purposes, and for expenses that are absolutely necessary. But it will prevent them from blowing the money irresponsibly.
Keep in mind that planning your estate isn’t done when your kids go off to college. In many ways, it’s just starting!
Here are a few more considerations…
* TRUSTS CAN PROTECT YOUR ASSETS FROM CREDITORS
When a person passes away, creditors often descend on their families like bees to honey. And any money you leave to your children is vulnerable to creditors they might have. It’s not a burden with which you want to leave your children. However, in most states, trust funds are protected from creditors.
Until recently, funds in inherited IRAs were protected, too. However, in 2014, in a case called Clark v. Rameker, the Supreme Court changed that.
YOUR KIDS’ ESTATE PLAN
If your kids are flying the coop, you should also, believe it or not, be thinking about an estate plan for them! Because once they turn 18 and live away from home, you might not be able to make financial and healthcare decisions on their behalf.
What happens if they’re hurt in an accident, and need medical care? Are you authorized to make financial and healthcare decisions on their behalf? Are you sure?
If you don’t have a power of attorney…you’re not!
Two types of powers of attorney might be useful…
* Durable General Power of Attorney: This empowers a designee to make financial decisions on behalf of someone who’s legally incapacitated.
* Healthcare Power of Attorney: This allows a designee to direct medical treatment of a legally-incapacitated person. In some states, a healthcare power of attorney is called an advance healthcare directive. The person appointed as designated decision-maker is legally-bound to honor the document. And in some states a healthcare power of attorney can work in tandem with a living will, to specify end-of-life treatment wishes.
IS IT TIME TO DO SOME PLANNING?
No one likes to think about his/her child injured. But, despite that, it’s wise to have an estate plan for them. If life takes a tragic turn, at least there’ll be one less thing for you to worry about.
Are your kids flying the coop…?
