If you’ve just brought home a new baby from the hospital you might be thinking, what do I need to do to protect this little guy or girl and be a responsible parent? Here are a few things to consider before you meet with an attorney to discuss estate planning:
Naming a Guardian
Usually, the most important (and most difficult) legal decision that new parents have to make is who to name as guardian for a minor child if something were to happen. It ’s important to discuss this topic and give it some serious thought before meeting with an attorney. You might want to begin thinking about people in your life who have similar values to you. Another factor to take into consideration is whether or not that person is in the right phase of life to raise a child, i.e. not an aging parent or a sibling who is still in high school or college. With some of my clients, each spouse has a different opinion about who the appropriate guardian should be, so deciding a guardian requires several conversations. The guardian you choose will be named in a paragraph in your will. The person named should be a family member or friend that you trust to raise your child into adulthood.
Uniform Transfer to Minors Act or Descendants’ Trust
Under North Carolina (and most state’s law), a minor cannot inherit accounts or property outright. This means that there needs to be a provision in your will that prevents your child from directly inheriting property. If there is nothing in place, then a guardian will need to be determined to manage the minor children's’ finances. This can be costly and time consuming given that the court must be presented with accounting information each year. There are several methods to prevent a minor from direct inheritance, including putting Descendants’ Trusts in your will or including a holdback paragraph that gives the executor the authority to set up Uniform Transfer to Minors Account (UTMA) on the minor’s behalf. An attorney can help advise you on which of these choices makes the most sense for you.
Listing Your Assets
Before you meet with a lawyer about your estate plan, you will likely be asked for a list of your assets. This helps us to think through the best way to structure your estate plan. In addition, it lets us know which accounts need to have the beneficiary designations updated to reflect the strategy devised in your will. Again, it’s important not to name a minor as the beneficiary of a 401(k) for the reasons mentioned above.
If you take the time to discuss and think through these topics, your estate planning meeting will be much more efficient. You will be well on your way to developing a thoughtful and comprehensive estate plan.