Becoming a parent is an important milestone in one’s life and though many excited new parents start to think about the immediate and near needs of a child such as clothes, food, medical attention and educational needs, many fail to plan for their child in the eventuality of death, disability or their inability to look after it in future. Estate planning allows your loved ones to know who should care for your child and how. It is a responsible thing for a new parent to do, but it involves thinking about unpleasant possibilities — and making tough decisions.
As a new parent, you should draw up at least “a basic plan” that would set out instructions for what needs to happen. Then, depending on your wealth legacy, the health of your child, whether special needs education is required, guardianship or whether you have any specific instructions relating to the choices to be made for your child, we will be able to advise you on the use of various other instruments that can be combined or included with your Will so that your needs are addressed.
Start with the “Basic”
By not writing a Will, your estate will not be distributed according to your wishes, but according to probate laws. Whether you have got a large or small estate, the only way to ensure that your wishes are honoured is to have a legitimate, professionally prepared, current Will that has been witnessed and stored properly for safekeeping. Wills not only transfer assets but also appoint a guardian for your child if it is orphaned. A court will normally honour the wishes of the parent to determine who will become its legal guardian(s) for both the long and short term. However, if these decisions are not formally put into writing, you will leave it to a judge to make decisions for you, sometimes after a messy and costly court fight.
In case you and your spouse cannot agree on one person, it is still better to name different guardians in your separate Wills than not to have any. If your child is orphaned, although a court would still need to decide, at least you have two people out there and available rather than to have the court hunt from scratch. The common choice is a family member, but what if you did not want a family member to raise your child? The court would not have known.
It is best to let your selected guardians know that you are appointing them as such and to make sure that they are comfortable with that appointment.
Guardian of Your Child v Guardian of Your Money
As a new parent, you may not be aware that the role of a guardian who will look after the support and care of your child may be different from the role of a guardian or caretaker of your finances that will be used for your child’s care. Though not necessarily always true, when you make the guardian of the child the same person as the guardian of the money, certain conflicts of interest situations may arise and you do not get the kind of checks and balances you would get if you name different people for different functions.
Special Needs Child
Caring for a child with special needs is financially and emotionally demanding. Special needs estate planning is complex and diverse and puts off new parents who are already struggling to cope, from setting aside money for their special needs child. However, by assessing your situation and seeking help now, you can gain better security for your child later. Owen Hodge Lawyers can help explain the options available and guide you.
Setting up a special needs trust is an effective tool to safeguard the future of your child. A special needs trust can be funded with savings, life insurance policies, investments or gifts. Anyone with high-value assets can be disqualified from government benefits, so it is crucial that care is taken to not name a special needs child as a beneficiary outright in a Will or life insurance policy. With a special needs trust, the wealth is not considered an asset of the child, therefore assuring that child’s eligibility for government benefits.
A special disability trust can also be set up, however, this type of trust only provides for the care and accommodation of a child with a ‘severe disability’, as defined by the law.
Creating Trusts
When it comes to safeguarding your assets, shielding them against estate taxes and providing for your child from youth into adulthood, creating a trust is worth considering. There are various kinds of trusts (for example testamentary trusts), and your estate planning lawyer will help you decide which one will do your assets and your wishes the most justice. The property in the trust is managed by a trustee – usually, this is someone who is good at handling money. It can be a parent (although not a good idea tax-wise) or a trust company.
Having a trustee in charge also means that the beneficiary cannot squander the property away. If you are concerned that your 18-year-old will not have sufficient maturity to handle the sudden windfall through inheritance, we can assist you with selecting a testamentary trust or a revocable living trust to delay the distribution of your assets until your child matures. You may also want to avail yourself of spendthrift provisions that will stop your child from pledging his or her inheritance as collateral for a loan for example.
At Owen Hodge Lawyers, we provide valuable legal information to new parents who want to understand the importance of estate planning and how they can safeguard their child’s best interests should something unfortunate happen. If you are a new parent considering estate planning options with your child in mind, call us today at 1800 770 780 or contact us via email at [email protected] to schedule a consultation with our team of estate planning lawyers. We look forward to assisting you.