Estate Planning for Young Families

Many people have the misconception that preparing an estate plan is only important to do when you are older in life and have accumulated significant wealth. Contrary to that, estate planning is just as essential for younger parents who are just starting to build their family and their nest egg.

No matter the value of your assets or your age, having an estate plan in place is essential to ensure that if something happens to you, your family will be adequately protected and provided for. Without an estate plan in place, the state will provide one for you and the outcome may not be so satisfactory. Under Illinois law, if a spouse dies without an estate plan in place, any of the deceased spouse’s assets that do not have named beneficiaries or are not jointly owned will pass one-half to the surviving spouse, and one-half to the deceased spouse’s children. This result can be very disappointing to a surviving spouse who likely expected to inherit 100% of his/her deceased spouse’s assets. This can be especially troublesome if the surviving spouse has not yet accumulated many assets of his/her own because he/she took time away from work to raise children. Another problem is that assets may be inherited by young children who cannot properly manage those assets on their own. Having the proper estate planning documents in place will ensure that your assets will pass to the beneficiaries you choose if something should happen to you.

Another important reason for younger parents to prepare an estate plan is to avoid probate in the event that one or both parents were to pass away. With no estate plan in place, a deceased parent’s assets would likely be subject to probate, which is a court-supervised process for settling and administering a deceased person’s estate. Probate is time-consuming (most probate proceedings take at least 12 months) and expensive (attorney’s fees and court costs quickly add up). With the proper estate plan documents in place, probate can be avoided, and the deceased parent’s estate can be quickly, easily, and efficiently administered without court involvement. This means avoiding additional expense and stress for the surviving spouse and your children during an already difficult time.

In addition to the importance of choosing your beneficiaries and avoiding probate, one of the most crucial reasons for younger parents to have an estate plan in place is to appoint guardians who would step in to care for their children if something happened to them. None of us likes to think about not being around for our young children. However, it is critical to designate guardians in your estate plan documents so that if the worst did happen you will have peace of mind knowing that your children will be cared for by a trusted family member or friend of your choosing. The alternative to not appointing guardians in your estate plan documents is that the court will appoint a guardian of its choosing. This means that the court could appoint an estranged relative, a relative whose values do not align with your own, or even a stranger to your family to care for your children. When you create an estate plan, you are in the driver’s seat and will be able to avoid having decisions about your family left up to the courts.

Another important reason for younger parents to have an estate plan in place is to ensure that any assets left to young children are properly administered and managed for them. By having a revocable trust in place, with subtrusts for children built into the trust provisions, parents can be assured that any assets inherited by their young children will be managed by a financially responsible trustee until the child is older and has attained a greater level of financial maturity. This prevents a younger child from deciding to spend all of his/her inheritance on things that may be appealing to a child, such as video games, the latest/greatest pair of sneakers, or perhaps even drugs or alcohol. By having a revocable trust in place, parents can control who will manage the money for their children, when they will receive it, and for what purposes.

Finally, preparing an estate plan is essential for younger parents to protect themselves and their family in the event that a parent becomes incapacitated. Having an estate plan in place is certainly essential upon your death, but it is just as essential during your life in the event that you become sick or injured and cannot make good medical or financial decisions for yourself. Having powers of attorney for health care and property in place will ensure that a trusted family member or friend will handle your health care and financial decisions, keeping your best interests in mind, if you are not able to do so. If you become incapacitated and have no powers of attorney in place, the court will appoint a guardian of its choosing to handle your healthcare and financial matters. It’s certainly wiser to choose your own agents, someone you really trust, to handle these important decisions for the benefit of you and your family.

If you would like to discuss preparing an estate plan to protect yourself, your assets, and your family (your most important asset), please contact estate planning attorney Jackie Luthringshausen at (847) 705-7555, or email her at jluthringshausen@lavellelaw.com.