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Sahn Ward Coschignano, PLLC


Estate Planning for Your Kids Impacts You More Than You Think

By Matthew E. Rappaport, Esq., LL.M.

In my experience, most people below the age of 40 put off estate planning because they believe their chances of dying in the near future are unrealistic. Delaying estate planning can have catastrophic consequences for these clients and their families if the unlikely does occur, but their parents typically underestimate the havoc that the death of a child or a child's spouse can wreak on their lives. While estate planning for young clients – even if they're single – will protect their spouses and children, many fail to realize exactly how much planning will also protect their parents.

If you're a parent of a child under 40, ask yourself how your life would change if your child or your child's spouse experienced a catastrophic and unexpected event. If you're retired, you might be prevented from moving to your dream home or taking your dream trip around the world. The assets you worked so hard to accumulate your entire life may be devoted to the care of your children and grandchildren. If a dispute occurs between you and your child's spouse or his/her family, your resources may be wasted on legal fees to wage custody wars or battles over the fate of your child’s estate.

For these reasons and many more, I always encourage clients with children over the age of 18 to have a serious talk with them about estate planning. When an adult child has properly planned his or her estate, the following problems have been sufficiently addressed:

  • Health Care Decisions: Parents lose the automatic right to access the health care records of children over the age of 18. To grant parents this access, children must execute a Health Care Proxy that includes a Health Insurance Portability and Accountability Act (HIPAA) waiver.

  • Division of Assets: For a married couple with children, New York State law provides that a decedent's assets will be split between the decedent's spouse and his or her children about evenly. If the children are minors, they gain full access to their share of the assets at age 18. A proper estate plan would ensure the assets pass outright to the decedent's spouse. If the decedent's spouse does not survive, then the assets would pass to the children in a trust.

  • Designation of Fiduciaries: Speaking of trusts, a Last Will and Testament gives a client the opportunity to name the Trustee who would watch over the assets he or she leaves behind for their children. The document would also name an Executor responsible for administering the client’s estate upon his or her death.

  • Custody of Children: The Last Will and Testament would also specify the client's preference for who would serve as Guardian of the client's children in the event both spouses pass away prior to their children reaching the age of 18. While this designation would not be legally binding, the family court will look to any such designation when ultimately making its decision about custody. If both spouses discuss this issue beforehand and name the same Guardians (or a desire to split custody), any potential dispute between the spouses’ families would be cut off before it even began.

  • Availability of Money: The clients would secure life insurance and long-term disability insurance to better protect against the possibility of unexpected death or disability. When these policies are paying claims, they will serve as the primary source of income to continue the lifestyle to which the client’s family has become accustomed. Without these vital safeguards, a client’s other family members would be burdened with the task of providing income.

These concerns would be addressed with a variety of legal documents, which may include any of the following, depending on a family’s circumstances:

  • Health Care Proxy: A document giving an agent the authority to make health care decisions on your behalf in case you are not able to make your own.

  • Durable Power of Attorney: A document giving an agent the authority to make various financial decisions on your behalf.

  • Last Will and Testament: A document providing instructions for the distribution of your property upon your death, designations of individuals in fiduciary roles (Executor, Trustee, and Guardian for minor children), and protection of the assets you leave behind for your loved ones.

  • Supplemental Needs Trust: A document allowing a person to receive an inheritance while still qualifying for government benefits such as Medicaid and Supplemental Security Income (SSI).

  • Life Insurance Trust: A document setting forth the administration and distribution of the life insurance death benefit once the insured individual dies. For tax planning purposes, a life insurance trust is designed to exclude the death benefit from the owner's taxable estate.

Each of these documents may be drafted for multiple generations to ensure optimal contingency planning for an entire family unit. The best estate plans are those addressing the holistic needs of all family members.

Although these issues are tough to think about and perhaps even tougher to discuss, anyone over the age of 18 (and his or her family members) should seriously consider setting up a comprehensive estate plan to prepare for the unexpected. We would be happy to guide you through the process and answer your questions.

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