The Three Documents Every Young Family Needs
Young couples with children are busy from dawn to dark, rarely having time to think very far ahead. It can be hard to see the big picture when changing diapers at 3am. There is neither time nor inclination to think of long term planning, including the dark clouds of life, such as death or disability. Though the risk of worst case scenarios is very low, with young children in the picture, planning for the best, but preparing for the worst is one responsible step in parenthood. Here’s what you need and why:
A Will: You may not think you have much to leave, and you may think you have everything covered with beneficiary designations, but wait! You have children. Who will take care of them if both parents die? Naming a guardian for your minor children is the most important reason to have a will, but this is often the reason parents put off making one. It is important to recognize that there is no perfect solution, think about what would be the easiest transition and life for your children. You will want a testamentary trust to hold your assets if both parents die while the children are minors, and direction in the trust as to how you want the assets used for your children’s benefit. The trustee of the trust does not have to be the guardian of the children. There are roles for multiple beloved family members in the event of your unexpected deaths. Be careful in naming your children as beneficiaries of POD accounts; name the trust instead. With specific language, trusts can even hold your retirement assets for the benefit of your minor children. A testamentary trust can outline exactly what you would want for your children if both parents were to pass — should they be raised in your house? Should they get funds for college, a car, a wedding, to start a business? The more information you can provide to your trustee the better.
A Durable Financial Power of Attorney (DFPOA): A devastating disability can be a terrible burden on a family, and if the disabled person is unable to conduct business, even temporarily, someone should be able to stand in their shoes and accomplish what needs to be done. Typically, spouses execute reciprocal DPOA’s that accomplish exactly that. The holder of the power is called the “Attorney in Fact” or the Agent, and that person has a fiduciary obligation to do that which is best for the disabled person. If it makes sense to name someone other than a spouse as agent, or in naming a successor agent, many people name a parent, responsible sibling, or a trusted friend. DPOAs are effective only while the principal (or grantor of the power) is alive; the document terminates upon death. The document should specify whether the agent has authority only when the principal is incapacitated, or whether the agent can act at the principal’s direction even while the principal is competent. DPOAs can be very useful even when incapacity or disability is not the issue. For example, assume a young couple is selling their first home to move into a new place and the date of the closing falls during one party’s mandatory business trip. The DPOA can be used allowing the remaining party to sign for both.
Advanced Directives: You should have written Advanced Directives for the same reason you should have a Will, that is to support and guide the people who love you during a tumultuous time. An Advanced Directive can provide three important items regarding your health care: an agent to make health care decisions for you when you are unable; direction as to your wishes for end of life care; and general funeral or burial decisions. Spouses are typically named as the primary agent, but up to three agents with successive or concurrent authority can be named.
As with many things in life, being prepared for the unexpected can go a long way in smoothing life’s ups and downs. The foregoing documents are important to avoid adding to the destructive cacophony for your children and family should you experience an already stressful and disruptive event. Cost is often cited as an obstacle, but if you are well prepared before you meet with an attorney, cost can be contained. We have a universal information gathering form that covers most of the information needed for an attorney to draft these documents for you. If you would like a copy of this form, please contact us. We would be happy to provide it to you free of charge. In the meantime, our best advice regarding getting around to obtaining these documents is to hold a picture of your child’s smiling face in your heart, and “just do it!”