Whether your children are minors or adults, there is always the question of whether you have taken care of them with proper planning, and whether you have made the right choices so that they can easily care for you if needed.
Life insurance can be a great asset in caring for your children, but people need to think it all the way through. Money alone won’t necessarily solve everything. Do you have legal documents that establish guardians for your minor children? Have you set up a trust for the money and established rules for using the funds?
One individual recently told me that he had no will or trust that would set rules for the support of his 3 and 5 year old daughters, but he and his wife had more than $2 million in life insurance set up to care for them. Really? Do you want your child to receive $1 million outright at age 18? How would you have handled $1 million when you were at that age? There’s more to it than just providing money for the support of minor children. Guardians should be named, and rules for the distribution of the funds should be established. Maybe they’ll need financial support before they turn 18. Who will control the funds? Think things through.
If you want your children or grandchildren to attend college, you can build incentives into the trust — but incentives are tricky and you should discuss options with an experienced estate planning attorney who can help you work through the downside to certain options. Some trusts only provide support if the child attends a four-year accredited institution, but what if the child wants to attend a community college first to save money, or wants to attend a special trade school or art school that doesn’t qualify as a four year program? Likewise, many trusts require that the child be a full-time student, but what if he or she is a young parent or single parent and can’t study full-time? What if they have a great full-time job and want to keep studying part-time? We’ve all seen these examples in families we know. The best results are usually obtained through having the money held in trust, and then granting flexibility to the trustee.
You should also give more than just a casual thought to the standard of treating all of your children or grandchildren equally. If your children are already in their 50s, you may have a good idea whether one may need more help than another, and you can determine whether that result is justified in your mind. When children or grandchildren are very young, however, or when you’re leaving money to children who haven’t yet been born at the time you sign your documents, you should consider the possibility that the children or grandchildren may have different financial needs as they grow up. Imagine the possibility that one child excels and has scholarship offers to great universities, while another child has a serious accident and needs special care and has special expenses just to get through the basic activities of daily living.
Estate planning attorneys deal with these issues on a regular basis and can help you through the different considerations to develop a thoughtful and caring plan for your loved ones. If you don’t have a plan, maybe you should put something in place now. If you’ve already established a plan, you should review it periodically and make sure that it still reflects what you want.