A New-Parent's Guide to Estate Planning

All parents (new-or-experienced) want to know is that, if something happened to them, their children will be taken care of.

Passing down wealth is usually goal #1 for parents.

But beyond that, there are a few other things you’ll want to specify to make sure a) your children are taken care of, and b) the adults you put in charge to execute those wishes have clear instructions on how to do that.

Putting your preferences in writing will help your family and loves ones during an already difficult time.

In short, a clear estate plan maps out how your affairs and property are managed if you:

• You pass away, or

• You become “incapacitated” (meaning still alive, but basically in a coma)

Most people think estate planning is just passing down money & property. 

But a well-balanced plan will spell out specific instructions on items like: who your children’s legal guardians will be, any end-of-life instructions, if you’d like to be buried or cremated, and more.

In this piece, I’ll describe the core estate planning documents & topics that all families should consider. 

Core Estate Planning Topics

• Revocable Living Trust [not as common in TX, very common in CA]

• Living Will

• Powers of Attorney

• Healthcare Directives

• Beneficiaries Review

• What if I do nothing?

Revocable Living Trust [not as common in Texas, but very popular in California]

Living in Texas now, I’ve learned that most ‘normal’ folks don’t require a trust for their assets. When I was back in California however, it was a no-brainer for basically anyone who owned a home.

Why?

When you pass away, if you have no documents, your estate goes through the State’s Probate Court system where the courts then determine whom your assets will pass to and how they’ll be split. 

In Texas, however, there is a streamlined Probate process that many are okay going through. In California, not only can the courts be backlogged, but there is also a (potentially hefty) cost based on how much property flows through! 

For those wanting to skip the Probate process and costs altogether, a revocable living trust is something you can be created. You must then transfer all your assets into it (you’d be surprised how many people forget this part). 

When you pass away, your Trust has specific instructions on what to do next – no Probate courts needed! Particularly important for items that don’t have beneficiary designations listed, like a house, a car, or other valuable property. 

A trust is where you can also specify that your children must reach a certain age, or achieve certain milestones, before they inherit their funds. Hence, a “trust fund.”

But if you aren’t worried about the Probate process, many happily just stick to a Living Will. One less item to hire an attorney for.

Living Will

When you pass away, the Probate courts will be searching for any formal Will that might have any guidance or instruction for them.  Anything to help the process.

It’s also where you can divvy up any special property or keepsakes (like which daughter gets your pearls, or which son gets your grandfather’s pocket watch). 

But just because you wrote down your wishes, doesn’t meant it’s not “contestable.” This is where you see long-lost cousins show up to try and make their claim on money and property. 

Aside from just money & property: a will is also hugely important when you have minor children. It is generally where you can list who you’d like to be your children’s legal guardians if you pass. 

It is also where you can get clear on if you have preferences on if you’d like to be buried anywhere, cremated, or just anything your heirs might find helpful as they wade through your things.

Powers of Attorney

In the event either of you become incapacitated, you can formally list who may have powers and control over your financial or legal affairs. 

Typically, these powers ‘spring’ into action, only when you become incapacitated. 

Healthcare Directives

In the event either of you become incapacitated, you can formally list who may have powers and control over your health decisions. 

Many of your preferences can typically be listed in the documents themselves.  This is commonly where you can choose ‘do not resuscitate’ preferences, or other end-of-life decisions.

You make the decision upfront, so your family or friends don’t have to make the difficult decisions.

Beneficiaries Review

In the event of any passing, any listed beneficiaries on accounts will supersede any of the Will or Trust instructions.  

It’s paramount to review every account in your name(s) to have the right people listed (so the assets don’t need to pass through Probate).

For most retirement and investment accounts, you’ll want to review your “Primary” (1^st) and “Contingent” (2^nd) beneficiaries behind that. You can also list multiple people. It’s very common for parents to list their spouse as 100% primary beneficiary, and the children (split equally) as contingent beneficiaries. 

At the very least, name each other as ‘Primary’ beneficiary. You can then decide if you’d like to list your children as ‘Contingent’ beneficiaries. 

For banking accounts, their version of this is adding a Payable on Death (P.O.D.) designation (sometimes called Transfer on Death).

As easier step for married people or partners, it’s generally simplest to have Joint accounts. The account would automatically go your spouse/partner, avoiding no extra steps.

What if I do nothing?

There’s an old saying that says even if you think you don’t have an estate plan, you actually already do.

If you pass away without any formal documents (like a will), your home State will decide how your property will pass to your heirs. They will also decide which heirs will receive your property and in which proportions.

Your family and heirs will thank you

It sounds strange to say, but it’s a lot of work to clean up after someone passed away.

You spent your entire life accumulating things, adding your name to as much as you can, all for it to be unraveled one day.

And more often than not, it’s your family & heirs who are caught doing a lot of the work.

But a little bit of work upfront - via Estate Planning - can go a long way into making sure your assets pass down smoothly.

I promise, they’ll thank you for it.

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