Changes To Your Estate Plan After The Birth Of a Child
Updating Your Estate Plan To Ensure Your Kid’s Future
When a new child joins your family, it probably means that you will need to make some changes to your estate plan. Although this is a joyous moment, you must also keep in mind that your child needs to be provided for if you become incapacitated or pass away. There are several types of documents you can use to plan your estate in Arizona- wills, trusts, powers of attorney, and more. An experienced Arizona estate planning attorney can help you create or change the ones that will work best in your situation. When you’re ready to update your estate plan after the birth or adoption of a new child, call or use our online form to request your free consultation with one of our Arizona estate planning attorneys.
Do I Really Need a Will? Won’t My Assets Automatically Go To My Child When I Pass Away?
It is true that your assets will still be distributed to your family members if you pass away without a will, or “intestate.” When this happens, your assets will pass according to your state’s intestate succession laws. In Arizona, the estate will first go to any surviving spouse and descendants, or children, grandchildren, and so on. If you don’t have a surviving spouse or descendants, your estate would then go to your parents, if they are still alive. If your parents have already passed away, it will go to any of their surviving descendants- your siblings, nieces and nephews, etc. Depending on the size of your estate, it could be subject to far more taxation without adequate estate planning. And if you pass away while your child is still young, not having an estate plan can create several issues. You won’t have appointed a legal guardian for your children, nor funds meant to help support raising your child. You may want to specifically designate some or all of your estate towards a specific issue like your child’s medical treatments or education.
Appoint a Guardian For Your Child In Your Will
One of the most important functions that a will serves is allowing you to designate who you would like to be the legal guardian of your child if you pass away before their 18th birthday. Many people choose a godparent, sibling, or close friend to list as the potential legal guardian. You should pick someone trustworthy, and you should also confirm that they are available for the responsibility before listing them in your will. But remember that what you list in a will won’t override any existing custody orders. So let’s say that you share joint custody of your child with your ex- the other parent will usually get full custody if you pass away. And if the other parent already has sole custody of your child, custody likely wouldn’t change if you passed away. But if you have sole custody of your children, designating a guardian in the event of your passing can reduce the chances of your ex regaining custody. If you have more questions about naming someone as your child’s guardian in your will, contact our office for your free consultation.
Life Insurance Beneficiary
Some people make the mistake of assuming that if they change their beneficiary in their will, their beneficiary on their life insurance policy (and other similar policies) will be changed as well. While a change in one or the other could be evidence used in a will dispute, you will need to change your life insurance policy if you would like to add your child as a beneficiary. Insurance policies are contracts, and the insurance company is required to pay out as per the terms of the contract. But if you’d rather leave a spouse, parent, sibling, etc., as your life insurance policy beneficiary and provide for your child through your estate plan, leave your life insurance policy as is.
Special Needs Trusts
If your child has a serious disability or medical condition, you may want to consider creating a trust to help with those expenses in the future. This type of trust can support a loved one with a disability without interfering with their ability to receive government assistance. A special needs trust allows the trustee to make purchases and pay for services on the beneficiary’s behalf. This can include groceries, personal care attendants, vehicles, education, vacations, and more. You will need to choose a trustee who fully understands what you want to provide the beneficiary with before signing. You can also use a pooled trust to invest funds with other families through a nonprofit organization. With how important a special needs trust can be, you should seek the advice of an experienced Arizona estate planning attorney before proceeding.
Leaving Money For Your Child’s Education
With higher education becoming increasingly expensive yet increasingly necessary to enter several careers, it’s no wonder that many parents prioritize providing for their children’s education in their estate plans. If you want to be certain that the funds or assets will be used for your child’s education, you may want to consider creating an educational trust.
The first choice in creating an educational trust for your child is deciding when the trust will become operational. A living trust goes into place during your lifetime, but a testamentary trust goes into effect after your death. There may be gift tax implications in creating a living trust that wouldn’t exist with a testamentary trust.
Educational Trust Trustee
The next choice you will need to make when you create an educational trust is who should serve as the trust’s trustee. You will be the initial trustee if you create a living trust, but you will need to name a successor. If you create a testamentary educational trust, you will need to name a trustee as well as an alternate. You should pick someone who is trustworthy to be a trustee, successor, or alternate. It helps if they are familiar with your wishes for the educational trust.
Then, you will need to decide how to divide the trust. You can name more than one beneficiary for an educational trust if you wish to do so. If you choose more than one beneficiary, you can designate how much you would like them to specifically receive, or leave funds in a “pot” for sharing. You can also choose which specific types of education you would like to support- college education, master’s and doctorate degrees, vocational training, military school, and more.
The last decision you should make for an educational trust is what should be done with it if the beneficiary never goes to school, or if there is otherwise money left over in the trust. You may want to name an alternate beneficiary, or give the money to the beneficiary when they reach a certain age. Regardless of what you choose, it is vital that you are diligent and precise when creating educational trusts.
Hire An Experienced Arizona Estate Planning Attorney
Hiring an experienced estate planning attorney at My AZ Lawyers can help make your wishes more clear, avoid taxes, and make your trust as profitable as possible in the meantime. For skilled legal guidance at an affordable price, contact us or use our online form to schedule your free consultation with one of our estate planning attorneys today.
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