If you have kids, you have probably already heard various people say, “you have to make a will!” Some people may have even told you why you need a will, but have you ever heard what you need to make sure that your will actually says?
Why it is so important to have a will if you have children
OK, so in case no one explained why having a will is so important, it’s really very simple. Your will is your directions to the probate court, telling them who gets to care for your kids, who gets to handle the money for them, how that money can be used and when your kids can get it. If you don’t do that then the state you live in will make all of those decisions for you when you pass.
Here’s how to go about making those decisions, keeping in mind that you can change your will at any time as long as you’re of sound mind, so don’t let indecisiveness stand in your way any longer.
Who would you want to raise your kids if you weren’t around?
This is honestly the biggest reason that I’ve heard that people don’t have a will: they can’t agree on who would raise the kids if both parents pass away. It isn’t a fun or easy choice, but it needs to be made.
For us, when our oldest daughter was born we lived in Kansas, but my brother was in Dallas. He was single, working full-time and going to grad school for his MBA. My wife’s sister was finishing grad school in Mississippi. So neither one was really in a spot to become a parent overnight.
We also had our parents. We knew that they would all be great parents, but they had been there, done that. We wanted them to get to be grandparents. That left one of my cousins, Rob and his wife. They were recently married, settled down and planning on starting a family of their own. We felt that they were actually the most prepared and logical to raise our child(ren) if the worst happened.
Communicating your choice
Once we made this decision, we not only asked Rob and Gail, but we told our parents and siblings about it and why we made the decision. This made sure that there would not be any hurt feelings or legal challenges if something happened to us. So take the time to think about who is in a good place in life to raise your kids, keep the kids close to other family members and have similar core values to your own. Most importantly, who is going to love your kids as their own? (and remember, you can always change this as life changes)
What happens to the money?
You don’t have to have the same person who cares for your kids be in charge of the money you leave behind. My Uncle Bob passed away when his sons were just about 17 and 14. Their mom was still living so she was able to care for them, but the state appointed a conservator for each of them to handle the money they inherited from their dad. That meant that court costs, delays and just a general hassle.
More importantly, according to state law, when they became legal adults (18 in most states, 19 or 21 in some) then the money was all theirs, no strings attached. You can kind of guess what happened. Even though they were good, bright kids, they were still kids. The money was pretty much gone by the time they turned 21.
What can you do to prevent that from happening to your kids?
There is a simple tool you can use in your will called a testamentary trust that gives you all the control you want. In essence, you are using your will to create a trust that only goes into effect when you die. It determines who manages the money, what it can be used for and when your kids actually get the money.
For us, having seen what happened to two of my cousins, we knew that a testamentary trust would be part of our will. You can choose a person or a corporation – e.g. a bank or trust company – to be in charge of the trust (aka the trustee). Family members are less expensive and they are more tuned in to the kids’ needs, but a corporate trustee has the expertise and tools to make things much easier (and the ability to say no without causing family rifts).
We chose to name my parents and a local bank as co-trustees. Then we said that the kids could get any income the trust generated plus they could dip into the principal of the trust only for their health, education or to maintain their current standard of living.
Then we thought about when they should get the money. We decided to split it up – 1/3 at 25 when they are getting started in life and a little more mature, 1/3 at 30 when they may be buying a house or starting a family and the last 1/3 at 35 when they are likely to be established and having multiple demands on their finances. This doesn’t fit everyone’s needs or desires, but it made sense for us and our family.
Getting it done
This may sound like a lot, but this is really common, everyday planning that any estate planning lawyer or even a good will-making software program can help you with. Check with your employer to see if you can get online or live legal assistance through your Employee Assistance Program (EAP) or pre-paid legal program. Either one would make this a low cost and easy way to make sure that even if you aren’t here to physically care for your kids, you are still loving your kids and making sure that they have the emotional and financial care you want them to receive.