Father’s Day has just passed, and you’ve probably either given or received some pretty great gifts. If you’re a dad, or someone related to a dad, you should know that the spirit of celebration doesn’t have to end just because the holiday is over. There is still a great gift you can give someone in your life, whether you’re giving the gift as a father or to a father. This is the gift of estate planning. Estate planning is the process of arranging and assigning the way in which your assets and debts will be distributed after you pass on.
Without an estate plan, your family could be looking at some time (and money) spent in probate court trying to figure out what to do. To spare them that tediousness, below are some common estate planning documents you should know.
A 529 plan is a tax plan that allows you to set aside some of your assets for the kids in your family who will be going to college. This plan is also called a “qualified tuition plan.” The qualified tuition plan can be sponsored by states, state agencies, or state institutions, and it comes with tax advantages. The 529 plan can operate as a savings account designed to accrue federal and state tax benefits (income tax breaks, low maintenance, simple reporting, control of the account, and more). The impact on financial aid is minimal.
As an alternative to a savings plan, you can have a prepaid plan, which will pre-pay tuition for colleges, either in full or in part. These 529 plans are generally fine to use for out-of-state colleges, but you should check with your estate planner to ensure that they are usable.
A living trust is different from a last will and testament. The living trust has three parties: (1) you, the donor, (2) the trustee, and (3) your beneficiary. You give nominal title to the trustee, who passes the title of the asset to the beneficiary after you pass away (or whenever you decide you want your beneficiary to have it). You don’t have to go through probate court with a living trust the way you do with a last will, as a living trust goes into effect immediately. Depending on the trust, it can be revocable or irrevocable.
Naturally, a Father’s Day post couldn’t go by without mentioning the kids who have made you a father. An important part of estate planning for those with minor children is deciding who will have guardianship of them in the event that something happens to you. Keep the guardianship plan updated if there are any changes (for example, if the person you would have chosen can no longer take the kids, make sure you immediately change your estate plan to reflect that). Having someone you trust as a guardian will give you peace of mind and benefit your kids immensely should something happen.
These are just some of the many documents that go into estate planning, and there are tons of other tools in the toolbox that will be right for your particular financial situation. Consult with an estate planner today to keep the Father’s Day gift-giving going.