Estate planning is often one of the most difficult tasks that a young family can undertake. In emotional terms, it can be unpleasant at best to have to consider one’s wishes for family after death or incapacity. In financial terms, it is often similarly unpleasant to consider the circumstances under which one’s property would be distributed and to whom. After all, most people will ask, can’t I make these decisions when I get older or when I have some impairment that requires me to plan for my family’s future and my own incapacity? The truth, however, is startling for a young family consider and can have life-changing consequences for children and families as a whole if a family member passes away without an adequate plan for their wealth and their children.
For a young family, failure to create and implement an effective estate plan, or wealth management plan, for family and children can have catastrophic consequences. Financially, all assets of the estate of one or more spouses not held jointly by both are subject to probate, which means that a court order is required to change title to real property or a home and to distribute funds to children or other family members. Worse yet, if no executor or administrator of the estate is named in a will, the court will appoint a person, usually a beneficiary under law, who may or may not be the person a family member would have chosen for the job. Assets are administered and catalogued by this person, and fees for the process as well as attorney’s fees for assistance with administration of the estate can easily exceed $50,000. Further, without a will or trust naming an executor or providing for beneficiaries to inherit property, often property will be distributed to grandparents or children in various forms, which again almost always do not reflect the wishes of the testator.
Finally, and most importantly for parents of young families to consider, failure to name a guardian for children to provide for both care and custody but also to hold and manage funds for them until they reach the age of majority and can lawfully inherit the monies managed for them, can prove to undermine the whole of an estate. Where, as is common, a parent passes away or becomes otherwise unable to care for the children him or herself without an adequate guardianship nomination or plan for the distribution of funds to care for them, extensive guardianship proceedings are required which may be initiated by any interested person. Further, the Court may appoint a separate, or the same guardian, to administer funds for the child. This is likely not the person that the parent intended and leaves a huge amount of uncertainty and risk in the process. No parent should be comfortable with this scenario.
Take for instance a scenario where no a parent passes away with two children, one 10 and the other 9 years old. There is a will, but the document is barebones and includes nothing about nominating a guardian for the children. There is no remaining family in the state. An out-of-state uncle learns of the predicament of the children and applies for guardianship but is denied both guardianship of the estate and of a significant inheritance of $500,000 cash. Thus, the Court is forced to order both children wards of the state and to place them in foster care with a court-appointed trustee to look after the inheritance until they reach the age of majority. No parent would be comfortable with this scenario.
For more information on estate and wealth planning to protect wealth, provide for the distribution of property, and protect children of young families, please contact me for a consultation and family wealth planning session.