Monday, April 27, 2009
Simple Will? What Do I Do As A Responsible Parent?
Since the most recent changes to the Estate Tax it is now certain that a couple with less than $6 million or an individual with less than $3 million in assets will NEVER be subject to the Estate Tax!
What Does This Mean for Middle-Class Families?
Simply put, a single person with no dependents and an estate worth less than $3 million can have a "simple will." This is just a document to leave their estate to whomever they wish. Depending on your state laws, the entire document might fit on one legal sized page.
This doesn't take into account the need for someone to make medical or financial decisions if you are incapacitated. For that you would still need a power of attorney and a advanced medical directive or "living will."
But, as far as the Will itself goes, there's no longer the need for sophisticated tax planning for middle class families.
But, What If I Have Children? What Do I Do As A Responsible Parent?
This is a different matter. If you have children then you will still need a will with proper trust language written into it.
This is because in many states your child would inherit all your property at the age of majority (mostly 18)! So, if anything were to happen to you, your children would inherit outright any life insurance proceeds, real property, retirement accounts or other assets you might have.
Suppose both you and your spouse were killed in a car accident?
If your child were orphaned whoever was appointed guardian could keep all your assets held in trust for the benefit of your child, saving the money for necessities like clothing, medical care or education. But, unless you establish a trust in your will that provides for a longer term (until the child reaches the age of 25, say) then all your assets would by operation of state law, pass to your child at the age of majority.
Since as a responsible parent you should probably have a life insurance policy sufficient to at least send your children to college, this could be at least several hundred thousand dollars in assets.
Will your child at age 18 or 21 have the maturity to handle such a sudden windfall?
If you think, "maybe not" then you are like most parents! It might well be better sense to make sure that the money would be used wisely -- for education, to make a downpayment on a home or apartment, to start a business or to simply invest to provide long-term for the child's future for instance.
Establishing a will with a trust arrangement to handle such assets and naming a trusted business adviser or family member to act as trustee of the trust can solve this problem.
If you are a parent with a minor child, you should consider contacting an experienced Estate Planning Lawyer in your state to consider what trust arrangements you should make to safeguard your children's future.
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