One of my college friends, Topher, is an estate attorney in Duluth, MN. I asked Topher if he would write an article about his services. My request included the definition of a will and to tailor it to professionals with a young family. Creating a will is often neglected by young people. After all, dying in your 20s, 30s, and 40s is impossible right? Unfortunately, failure to plan coupled with an untimely death can result in remaining family fighting for assets in the court room. Most recently, the death of Prince highlights the importance of estate planning.
Personal finance is interesting to me. After all, I read and write about it often in my free time when I am not at work, spending time with family, exercising, reading about or watching sports, or reading literature pertaining to my profession. The will is the left tackle of personal finance. The left tackle’s job is to protect the quarterback (assets). Particularly important is pass protection when the quarterback takes a 3, 5, or 7 step drop to throw a pass. Asset allocation, withdrawal rates, compounded annual growth rate, mutual funds, bonds, and dividend paying stocks are more engaging topics because no one likes to envision their mortality but without a will the personal financial plan is susceptible to problems.
Lastly, Topher and Get In the Green are not affiliated. He was kind enough to write about the importance of a will to educate readers. Knowing him over the years I would not hesitate to recommend his services because I know he will work hard to identify your needs and is a person of high moral character.
The Importance of a Will
You are starting into the adventures of adulthood, embarking on your career, have met your partner, and are blessed with children. You are trying to save but unable to pick up as much steam as you would like. Of course, there are bills to pay. You are young, healthy, and estate planning is the furthest thing from your mind. However, you are in prime position to plan for future circumstances.
A worry of parents is what will happen to their children if they meet an untimely death. This usually becomes more pressing when vacationing without them. To alleviate the anxiety, there is a simple, inexpensive, and quick tool you can utilize called a Contingent Trust Will.
What If No Will is in Place Upon Death?
A great deal of additional costs in attorney fees and expenses are likely if a will is not in place upon death. In addition, remaining family are left with the emotions of grieving, anxiety and stress associated with pursuing assets, and significant obligation of time. Here are some observations I have made when an untimely death is coupled without a contingent trust will.
- Grandparents fighting over custody of minor children.
- Guardianship needing to be established for the benefit of minor children to hold any money or property they would inherit.
- The guardianship requires annual accounting, court approval of expenditures, and other types of court involvement.
- Minor children receive all remaining assets when they turn eighteen.
How a Contingent Trust Will Can Help?
The Contingent Trust Will is simple. Essentially, it says if one parent becomes deceased, all the money and property goes to the surviving parent. Ordinarily, this is not an issue because in most cases, the surviving spouse is the joint owner of all assets or the beneficiary of assets. In that event, the will is not given any effect, the assets simply pass to the survivor by operation of law.
If both spouses meet an untimely death, the will provides that all assets are divided equally among their children. If children are under a certain age (say thirty) the share received would be held in a trust. This is for the benefit of the child until reaching the designated age. The parents name a person or bank to act as trustee and provide direction to the trustee on how money and property will be handled until the designated age is reached. There are ways this can be customized to accommodate the parents wishes. Examples include provisions for private school, college education, travel, etc. The goal is to ensure whatever they would have provided for their child will be by the trustee.
The will also provides that when the designated age is reached assets are distributed. There is also a provision that provides for the disposition of money or property if the child dies before reaching the designated age. Oftentimes, the Contingent Trust Will provides that children may make voluntary withdrawals. This may occur at specified intervals.
The Contingent Trust Will also gives the parents opportunity to designate who they want as guardians of their minor children. I recommend a primary and alternate guardian be selected. If the primary guardian is unable or unwilling then there is someone else in place so the court does not get involved deciding who is going to care for the children.
Be Sure Your Beneficiaries Are Set
One key to ensure a Contingent Trust Will works is to change the contingent beneficiary on any accounts or policies. The effect is if both parents are deceased, the money or property would go to the contingent trust rather than directly to surviving children. Most insurance policies and other assets with a named beneficiary possess a default provision stating without a surviving spouse that assets go to the children. To protect against this, I suggest the contingent beneficiary be changed so money goes to the contingent trust.
Modifications Are Needed Only in a Change of Circumstances
Most Contingent Trust Wills remain good and valid until minor children reach the designated age in the Contingent Trust Will. It is only with drastic change in circumstances that changes be made. This would include divorce, adoption, large inheritance, or other material changes of circumstance. Thus Contingent Trust Wills have excellent utility for the period of time when parents are raising children. For parents of small children – a small investment of time and money can provide peace of mind with respect to their most treasured assets-children.
For more information or to discuss the right estate plan for you or your family, give me a call at:
(218) 726-0805 x124 or send me an email at firstname.lastname@example.org.