Half of Americans with children do not have a legal will to protect their families.¹ The most common excuses people give for not having a will are procrastination and the feeling that it is unnecessary.² If you have children, it is important to have a will, regardless of your financial assets.
A will can serve a variety of purposes. One of the most important is to designate a guardian for minor-age children if you should die or become incapacitated. Otherwise, the probate court may need to select a guardian, and your child’s financial matters might be managed through the court. A legal guardian can provide daily care as well as financial oversight; you can always name a different person as custodian for specific accounts.
It’s generally not a good idea to name a minor child as the primary beneficiary of a retirement account or insurance policy, although you could name children as contingent beneficiaries as long as you also specify a guardian or custodian. Beneficiary designations on these types of accounts typically supercede instructions in a will, so be sure that the guardian/custodian you name on the beneficiary form corresponds with your will, unless you want the account assets controlled by a different individual.
Special Trusts for Special Needs
If you have a child with special needs, you might consider setting up a special-needs trust and referencing the trust in your will. A properly executed special-needs trust can help provide for an individual’s lifetime care and other needs while maintaining eligibility for government programs such as Medicaid, Medicare, and Social Security Disability Insurance. Because the use of trusts involves a complex web of tax rules and regulations, you should consider the counsel of an experienced estate planning professional and your legal and tax advisors before implementing such strategies.
Creating a will does not have to be expensive or complex. If you already have one, review it regularly to be sure it reflects your current wishes.
1) Yahoo! Finance, March 28, 2012
2) AARP, May 1, 2012
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