12 Ways to Protect Your Children's Future
Alexis Neely is a personal family attorney based in Redondo Beach, Calif. Below is a checklist of things to consider when planning for the future for your children and your estate:
A family’s most precious assets are always their children. And yet, many parents have not been educated on these 12 Steps that all parents can take to protect the future of their children.
Step #1: Designate first responders -- What would happen if you died or became incapacitated while your children were in the care of someone else? Somebody would eventually call the police, right? Unfortunately, if your children were in the care of a person without documented and legal authority to have custody of them, the police would have no choice but to call in Child Protective Services. Your children could be taken into foster care until one of two things happened: someone with clear legal authority arrives to take custody of your children; or the courts determined who would have clear legal authority through the guardianship process.
Step #2: Provide clear guidance to your first responders -- You absolutely want to inform the people that are your first responders of their role and how important that role is to you. Your first responders must be prepared to go to your children during a time of crisis with the appropriate documentation giving them the authority to stay with your children.
Step #3: Ensure that caregivers and babysitters have clear instructions -- If you are like me, the last thing you want to happen is for the police to show up at your house and find your children with a caregiver who does not have legal authority to stay with them, and does not have any idea how to contact someone who does have such authority. In the event that happens, the police have no choice but to call in Child Protective Services.
Step #4: Define guardians for long-term care -- Parents regularly tell me that they have discussed and agreed upon a guardian for their children, and have even made their wishes known to their families. However, verbal communication itself is not enough, and can lead to significant internal family conflict. It can also result in your wishes not being followed when it is too late. If you fail to communicate your wishes in a legally binding, written document, you are placing your children in a situation in which every family member has equal priority of guardianship. The state will ultimately decide who raises your children. Legal documentation is particularly important if you intend for a friend to care for your children, as courts will almost always choose a family member over a friend.
Step #5: Plan even if you are uncertain who should be guardian -- I’ve heard many parents say, "we have not made a plan because we can’t decide who should be guardian." Regardless of whether you make a plan, the State has a plan for you and your children. In many cases, the State’s plan is not the plan you would choose. As I discussed in Step #1, your children would likely be placed in Child Protective Services if you do not have local family to serve as First Responders. Someone would then have to petition the court to be appointed the official guardian of your children. Almost everyone has a family member they know they would NOT want to raise their children. Imagine if that was the person the Court appointed to raise your children! And, even if you would be okay with any member of your family raising your children, imagine the strife that could occur when more than one family member comes forward insisting they are the right person. Don't let your reluctance to make a decision turn into a decision that you don't want. Download a free article that will give you a proven method on How to Choose the Right Guardian at http://www.choosetherightguardian.com.
Step #6: Let those designated as guardians know how you want your children raised -- As a mom, I know that there are certain things that are critical to me when it comes to the way my children are raised, such as the spiritual foundation I want them to have, the sense of financial responsibility I want imparted to them, and the educational path I want them to take. Just by way of the fact that you are reading this, I know that these (and other) issues are critical to you as well. The only way to ensure that your children will be raised with your values is to make them clear to the people you’ve named as Guardians if they are ever called on to serve.
Step #7: Document your plan, regardless of your assets -- Many people jeopardize their children’s future by thinking they do not have assets and therefore do not need to plan. Regardless of whether you have significant financial assets, if you have minor children, you need to consider who would raise them if you could not. If you have any assets at all, you need a plan to ensure that the right thing happens to your assets in the event of your death. Consider the following two situations that recently came across my desk -- both families who hadn’t done any planning because they probably thought they didn’t have enough wealth to plan. First there was an aunt willing to take her four nieces and nephews into her care after tragedy struck and the children were left without parents. The aunt lacked financial resources -- she didn’t even have money to hire a lawyer to help carry out the guardianship proceedings. The parents left only $50,000 behind in assets, money the aunt desperately needs to help raise the children. Sadly, the aunt spent well over a year trying to convince the bank to release the funds and ultimately had to find a lawyer and go to court to get access to the funds. There's also the case of a janitor hit by a car and severely injured, left unable to communicate or sign documents. He had only $10,000 in a bank account in his own name, which no one can access it without a court order. This was $10,000 that his family desperately needed, but the court process usually proves to be expensive and confusing. Planning would have avoided both of these unfortunate situations.
Step #8: Provide enough financial resources -- Too many families consider insurance a waste of money, but do not have enough in savings to care for their children in the event of an emergency. Do you want your children to attend college? What kind of lifestyle do you want your children to have if you can’t be there to financially support them? Remember, you are responsible for ensuring sufficient financial resources to support your children upon your death.
Step #9: Help your family avoid probate -- If you have assets that need to go through the court process called probate upon your death, you might want to put your assets in a living trust. Probate is expensive, complex, time consuming and inconvenient -- probate will cost your estate approximately 5 percent of your gross assets, and will take a minimum of 12-16 months in the state of California (other states may vary.) Also, the information in a will is open to the public. While the general public likely does not care about the value of your estate, predators care if your children are to receive substantial assets when they turn 18.
Step #10: Protect your children’s inheritance until they are old enough -- Many young adults who receive an inheritance often use the money less that wisely, buying fancy cars or taking friends on vacations. If your estate goes through probate, you control neither the age at which your children receive their inheritance nor how they spend it. At the end of probate, your funds should be held in a guardianship estate account for the benefit of your children until they turn 18, at which time all the remaining funds would be distributed to them outright.
Step #11: Protect your children’s inheritance from lawsuits and future spouses -- Many families leave their children’s inheritance unprotected from creditors, predators, spouses and estate taxes, assuming that only wealthy families create lifetime trusts for their children. In fact, lifetime trusts are more beneficial for the average family, who would be penniless if they had to fight a lawsuit, a money judgment or a divorce. You can create a lifetime asset protection trust for your children that will allow them to control the assets at the time that you deem appropriate.
Step #12: Consider the impact of estate taxes -- It's a little-known fact: For the vast majority of families, estate taxes are voluntary. But ignorance of the impact of estate taxes on your family can cost up to $960,000. Add up your own taxable estate: the equity in your home, the value of your personal property, bank and brokerage accounts, your retirement accounts and life insurance. Estates exceeding $2 million could be subject to estate tax at a rate of 46 percent. For example, if you have a $3-million taxable estate, your family could pay 46 percent tax on the $1 million exceeding the threshold. In other words, your family would pay $460,000 in estate taxes.
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