Many of our clients were laid low by the great recession and lost a lot of their net worth. Many are just starting a family and getting established in their careers. If you fit into one of these groups, you may ask if you even need an estate plan.
You do. Why? You need to have a will to name guardians to raise your minor children if something happens to you and your spouse. You also need a durable power of attorney to provide for management of your assets if you become incapacitated. And you need an Advance Health Care Directive to authorize others to be your health care agents to make medical decisions for you and a HIPAA to authorize doctors and nurses to talk to your health care agents.
You also need a document to state your intent regarding the distribution of your assets. This can be a will or a living trust.
If you have young children, and you follow my advise, you will have a boatload of term life insurance. Term life insurance is cheap and will provide for your family if something happens to you while you are building your nest egg.
There are two reasons why you should use a living trust with your life insurance.
1. If you name your young children as beneficiaries of your life insurance policies, most insurance companies will require a probate before they will distribute the funds to your child’s guardian. If you name your living trust as the beneficiary of your life insurance policies, the life insurance company will not require a probate. The insurance company will write a check to your successor trustee.
2. If you and your spouse pass away, do you want your 18 year old son or daughter to have control of the life insurance benefits you leave them? What were you like at 18? I know. . . Better to leave it to them in a trust that someone you can rely on, like your brother or sister, parent or friend, controls for them until they are mature enough to make good decisions. The trusts for your children can be established through your revocable living trust
Using a living trust with your life insurance which will be easier and a lot less expensive than having your estate go through probate and it can protect the life insurance benefits from bad decisions by your children.