One thing is sure: the real fun in accounting and time management begins after having kids. That’s why having your ducks in a row is essential before growing your family. Unforeseen things can happen to them if not, and as parents — these challenging conversations help ensure your peace of mind and their safety in every potential scenario.

According to a survey in April 2022, only 33% of Americans have put these estate plans in place, meaning as much as 67% still need to. By thinking through all the awful scenarios that could happen and pragmatically making the best decisions for your children, you’re ensuring the very best for them so you can sleep easier at night.  

This post helps cover some basic concepts and definitions as you get started.

Definitions You Need to Understand When Setting up an Estate Plan  

What is a trustee?

A person or member of a board given control or powers of property administration in trust with a legal obligation to administer it solely for the specified purposes.

What are beneficiaries?

A person who derives advantage from something, especially a trust, will, or life insurance policy.

What are the different types of trusts?

Revocable trusts

These are the most common types of trusts because provisions can be altered or canceled depending on the wishes of the grantor or the originator of the trust. In other words, you can change this living trust while alive. Only after death does property transfer to the trust’s beneficiaries.

Irrevocable Trusts

Any trust where the grantor cannot change or end the trust after its creation. These have the most protections in terms of taxes and any lawsuits if they were applicable.

Testamentary Trusts

A specific type of trust that’s created as part of a last will. A grantor (the trust’s creator) leaves instructions in their will for a named executor detailing how their assets are managed by a trustee and distributed to beneficiaries.

What is the benefit of setting up a trust for my family?

The most significant benefit to setting up a trust is that finances and the distribution of your estate can flow seamlessly without going through the probate process. The probate process is long, costly, intrusive, and governed by statutes that may not mirror your desires or intentions. The most important thing is to ensure you’ve thought through all the tough decisions so that this doesn’t happen and your kids deal with a drawn-out process. 

Here are some questions to discuss with your spouse for the most productive meeting with an estate attorney.

5 Questions to Answer Before Setting Up Your Estate Plan

1. Who would take the kids if something happened to you both, and multiple scenarios after that? In other words, do you have a first choice, and if a member of that family were to pass, a second choice?

It’s good to have a first choice of who kids would go to if something happened to you, but also a secondary option if the dynamic of that situation changed. For instance, if you choose a parent, what would it look like if one of them were to pass? Would you want the same option or move to another one if you strongly feel two figures are necessary? If it’s someone on your spouse’s side, is there a counterparty on your side that you want included? Again, this is to spread the responsibility and choices during tough times and ensure both voices are around and present to make those sound decisions in your absence. 

These are complex discussions, but ensure the people taking on the responsibility don’t have to make these choices or get put in a tricky spot if something changes. The estate plan sets forth all your wishes for your children in advance.

2. Who will be responsible for the finances if something happens to you both? Is it one person or multiple people?

This can be the same person(s) that become guardians, your kids, or someone separate. They can also be split between parties, so you have sounding boards and a checks and balance system if that’s important to you.

3. At what age will your kids have access to funds, and who is responsible for making decisions until then?

Everyone has different financial situations; some may see firsthand the result if funds are given to kids too early. Ensure you have a plan for how your finances are distributed to your children and when they receive access. You can parse through this and again take the work out of it for whoever becomes responsible for making these decisions for your children.

4. If something happened to your spouse, who’s responsible for making decisions about your life? 

Some examples could be picking a sibling or parent or another trusted party that can make decisions on your life if your spouse isn’t able to for some reason. You can also spell out if you’d like your organs to be donated or not and note in your doctor’s file your estate plan so they know what to reference if needed in the future.

5. How many opinions, if any, do you want them to have before making decisions on your life?

Some unique clauses to draw out might be how many doctors you want them to consult or for what duration of time they have to decide to help again; it is more pragmatic during any tough time or situation that were to occur.

Final Thoughts on Setting Up an Estate Plan for Your Family

These are all things that you can have in place so that even if something were to happen, your kids are well cared for and not dealing with financial or emotional nightmares. After drawing all this up with a trust attorney and signing, it is essential to ensure the appropriate people have access to the information or know where to find it. There are also services now to file online. These estate plans are living and breathing documents you can change and amend over time. We hope this helps you with the tools getting started.

For something more light-hearted after reading this, check out our latest episode on the Digital Wellness Revolution that just dropped on MomShine.