It is estimated that only 55% of adults have an estate plan, and that number shrinks with younger generations. While older generations may be the most prepared regarding their end-of-life plans, younger generations have something perhaps more important to them than their finances to think about: the care of their minor children. An estate plan allows parents of young children to choose who will care for their children if both parents pass away before their children reach the age 18, as well as who will manage their finances for the benefit of their children, how that money can be spent, and when their children will have access to their inheritance.  

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Parents can designate a guardian for their minor children in their will, and they can choose the same or a different person to manage their children's inheritance for their benefit. Under the Uniform Transfers to Minors Act, parents can designate a custodian to manage property for the benefit of the minor until the minor turns 21. If parents don't want their children to receive their full inheritance at age 18 or 21, or wish to have additional control over how the money can be used, then a trust may be a more appropriate estate planning vehicle.

 

Parents may also want to consider whether they have adequate life insurance to provide for the long-term needs of young children. If parents do have life insurance in place, careful thought is needed when designating beneficiaries. For example, if a parent designates a minor child as a beneficiary under a life insurance policy, and the parent dies before the child reaches age 18, then the court will appoint a custodian to manage the payout for the benefit of the minor until the minor turns 18. The funds will be subject to court oversight which can increase the expense and burden of managing the funds. Further, if the parents did not appoint a custodian in their will, they will have no control over who would ultimately manage the funds until the child's 18th birthday. Further, an 18-year old may lack sufficient maturity to make informed decisions about how to manage a large sum of money all at once. These problems can be addressed through the creation of a trust or proper use of beneficiary designations under Pennsylvania's enactment of the Uniform Transfers to Minors Act. 

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Parents of young children are in the thick of it: sleepless newborn nights, toddler tantrums, and the chaos of juggling after school activities. Estate planning is the last thing on many parents' minds. But it could be one of the most important things you do for your children. Just like setting up a college savings fund or priming them to take over the family business, an estate plan is an important part of planning for your children's future - and there's no better day to start. Call today to schedule a consultation.