Author and financial advisor, Suze Orman was absolutely right when she said, “Estate planning is an important and everlasting gift you can give your family.” Estate planning is not just another part of financial planning. It is a way to ensure that your loved ones are taken care of when you are not around anymore. Parents are instinctively cautious when it comes to the wellbeing of their children. Ideally, you should apply the same emotions to estate planning and draft a will that takes care of the individual needs of your children. Here are some things that you should concentrate on, to make sure that your children are able to benefit their inheritance.

  1. Update your will after any major event in your family: If you remarry, get divorced, or are widowed, you must remember to update your will accordingly. The most common fights over a will occur between children and step-parents or between step-siblings. If you remarry and have more children, you may want to distribute your income equally among all of them. Make sure to make these changes in your estate plan. You must also look at the financial dynamics of all your children. For example, if you have stepchildren, they may be inheriting some property from their biological parents. Keep a note of all these things, so you can make a just distribution of your wealth.

The same goes for a spouse. If you remarry or get divorced, you must decide how you want to distribute your savings among your ex-spouse and your current spouse. 

  1. Make an inclusive plan for minor children: The most important thing to remember is that estate planning is the first thing you should do when you have a child. People tend to wait around till they’re old to draft their wills. Nothing in life is fixed and as a parent, you must always have a plan in place for your child, especially for a minor.

    Start by designating a guardian for your child. A guardian can be someone who takes care of the day-to-day requirements of your child, and is also in- charge of the financial assets of the child up to a certain age. This can be a family member or a friend. Parents can also opt for a trust. Or pick separate guardians for different tasks. Also, remember to back them with alternative guardians.

    Remember that minors will not be able to understand the financial details of your will. This is why it is very important for you to choose a trust or a guardian who does not exploit your child financially. A way to deal with this, is to be extremely precise in your will. Specifically, mention what the funds can be used for or at what age your child can inherit your estate. This is also an excellent way to keep a check on how your child uses their inheritance. If your children are old enough to understand some of these aspects, try to discuss these options with them, to see who or what they are comfortable with.

  2. Make provisions for disabilities: If your child has a disability, you will require a special needs trust for life. Keep in mind that your child will also receive benefits from the government. Devise a plan where your estate does not interfere with these benefits.

    In cases where parents have more than one child, they often distribute their estate among other children, thinking that government benefits can cover for the disabled child. However, you must understand that while most government benefits cover things like home, your child will still require extra income to meet other needs like wheelchairs, home care, special beds, or home appliances.

    Another common mistake is to leave your mentally sound children with a substantial portion of your estate, expecting them to take care of the disabled child. Your estate can be distributed among your other children and their spouses in case of a divorce. They can be sued by a creditor or simply grow distant from their siblings. Therefore, it is best to set up a special needs trust that can take care of your disabled child’s requirements.

While these are the most important factors to consider in your estate plan, there is another dynamic that can cause huge inconvenience to your children, i.e. tax. Here are some ways to tackle this problem:

  1. If you own a substantial amount of wealth, you can gift your children some of it on an annual basis. This approach is particularly useful for high-earning entrepreneurs and other professionals. As per the regulations of the Internal Revenue Services (IRS), parents can gift each of their children up to $ 13,000 in one year, without paying any taxes. The total limit, however, cannot exceed $ 26,000. As per federal estate tax rules, these gifts cannot be taxed on the first $ 3.5 million of your assets, at the time of your death.
  2. If you own real estate, you should put it under a child’s name instead of your own. If you have real estate in your name, it will trigger huge amounts of capital gains tax in the event of your death. However, if your assets are partially or entirely owned by a child or a trust, the tax liabilities are a lot less.


To sum it up

Science fiction author, Robert Charles Wilson, wrote in one of his books, “You never stop being a parent, no matter how old or wise your child becomes”.  As far as estate planning is concerned, you never stop being a parent, even if you are no longer around!

Your parental responsibility in estate planning is to provide for your child’s every need. The future is unpredictable, so the best way to ensure your child’s wellbeing is by being prepared for everything under the sun. Be clear and concise in your will, keep back-ups and alternatives for trusts and guardians, and make decisions that will help your kids in the long run. Keep your will equitable and not just equal.

Do you need help in drafting your will? Consult financial advisors for tips on devising a wholesome estate plan. 

Author's Bio: 

A team of dedicated writers, editors and finance specialists sharing their insights, expertise and industry knowledge to help individuals live their best financial life and reach their personal financial goals. At WiserAdvisor, we believe that there is no place for fear in anyone's financial future and that each individual should have easy access to credible financial advice.