Thanksgiving dinner, Christmas catalogs, Hanukkah menorahs – the season is here! And in the blink of an eye, it will be time to make (and keep) those New Year’s resolution for 2012.
For parents, I believe the most important resolution is to take concrete steps towards planning a more secure future for your family in the new year.
Hopefully, this fall you’ve already seriously considered picking a guardian for your child and writing a will, and you’re moving forward on buying a life insurance policy.
Now, let’s take a look at three ways to complete a basic estate plan to protect your family’s resources and long-term well-being, so your loved ones are prepared for anything that comes down the pike.
But first, here’s my suggestion on how to get the most out of this article: find a quiet evening this December, make some cider, sit by the fire, and read this again with your spouse. I found that the couples who make financial resolutions together are much more likely to keep them several months down the road. I also find the couples who can talk candidly about a will are more likely to actually write one. So use the new year as an opportunity to open up about how you’re going to get your estate plan finished this winter, and how you’re going to cross one of the most important parenting responsibilities off your list.
1. Pick an Executor
An executor is the person who gets stuck with a lot of the nuts and bolts of carrying out your will. He or she is responsible for paying any taxes and debts associated with your estate and then distributing all of your property in accordance with your last wishes.
It’s important that you find someone to be the executor who is fairly organized and good at following directions, and that you choose a person you and your partner feel comfortable asking. You’re going to have to get a verbal commitment, so don’t pick a cousin you’d rather not have this kind of conversation with.
2. Draft a Trust
So many parents see the words “trust” and “fund” and think they don’t have to read any further. They assume trusts are only for rich kids like Ivanka Trump and Paris Hilton, and not for ordinary, normal families like most of us have. Big misconception.
Here’s the deal: without a trust, your child will inherit any assets (the house, life insurance proceeds, retirement savings), outright at eighteen or twenty-one depending on the state where you live. And in either case, that could be a recipe for disaster. Picture your typical high school senior or college junior with a big wad of cash- sometimes hundreds of thousands of dollars. The money you’ve carefully set aside for your child’s future could easily disappear on a brand new sports car or spa vacations for her sorority sisters.
A trust allows you to control the “how’s” and “when’s” by appointing a person (the trustee) to manage and disperse money to your guardian and then to your kid when he or she reaches adulthood. I suggest picking someone other than your child’s guardian as your trustee to add another check to your estate plan. I also suggest leaving a letter for your trustee that spells out your core financial parenting values and how you’d like your money to be spent if something happens to you.
3. Write a Living Will
Parents are often confused about the difference between a will and a living will. While a will appoints a guardian for your child, a living will (sometimes called a health care proxy or directive) appoints a health care agent to make health care decisions if you are unable to make them yourself. It also spells out your last wishes about prolonged medical procedures.
While I don’t think a living will is as mission critical as a will (which should be your absolute top priority as a parent), I do advise mothers (and fathers) to have one prepared, especially if you’re already sitting down with an attorney. Most lawyers have a “package deal” when you’re writing your will anyway. And it’s always better to cover all of your bases when it comes to something as sensitive as end of life medical treatment.
Remember: the ultimate gift to your family is to make sure all of these unpleasant contingencies have been addressed, and you can live happier today knowing you’ve taken care of everything.
Jacoba Urist is a treasured guest writer here at MainstreamMom. Jacoba spent the last year researching (almost) every aspect of parenting and planning for the future for her book, The Happiest Parent. Jacoba is a lawyer, mother and Huffington Post Parents blogger in New York. She has a JD and LL.M in Taxation from New York University. Follow her on Twitter.