When it comes to the ongoing coronavirus pandemic, we never know how quickly things will change. Many states are still debating whether to send kids back to school, while others have already made the choice to reopen the schools, albeit with some precautions. Whatever the outcome, one thing is clear: you need to make sure your kids are protected for the upcoming school year and beyond.
There are several different ways in which estate planning and its related legal fields can help you plan for your child’s future and protect them from harm. This article will serve as a guide to the basic legal strategies for keeping your kids safe.
When you think of trust funds, you might assume that they are just for the ultra-wealthy. Images of Ivy League schools and mansions may come to mind. However, that is a misconception, as trust funds are for everyone.
A trust fund involves three parties: the beneficiary (your kid[s]), the donor (you), and a neutral third party, called a trustee. The donor, which is also called a grantor in some states, will create a trust fund, which holds and manages the grantor’s assets on behalf of the beneficiary. The trustee oversees the fund. The grantor sets the terms and conditions for distribution of the trust fund, as well as how the assets are to be held or invested.
Trust funds can take the form of a simple bank account, where the grantor deposits money that is owned by the trust, as opposed to an individual person. Over time, the fund will grow. You don’t just have to place cash in the trust fund—you can also put other assets like real estate or stock into the fund.
In order to set up a trust fund, you will need to meet with an attorney. You and the attorney will set up stipulations and name beneficiaries. Examples of stipulations include monthly payments to beneficiaries or restrictions on how beneficiaries can spend the money. You, as the grantor, get to decide these parameters.
Next on our list is guardianship. If something happens to you while your kids are still young, the state will need to ensure that a guardian is chosen for the children. By setting up guardianship papers now, you can be the one to make this decision (as opposed to the government).
The kids’ guardian can be a relative or close friend. The guardian should, obviously, be someone responsible, who can attend to the kids’ day-to-day needs. Above all, make sure that you consult with your proposed guardian before naming them as such.
Tax-Advantaged College Savings Plans
It goes without saying that college is very expensive. Even scholarships don’t always cover every financial expense your child will run into while in college. The IRS offers tax-advantaged college savings plans (known as 529 plans or “qualified tuition plans”) that let you put aside money for your kids’ education.
These college saving plans often have a lower tax rate, which makes them preferable when compared to other means of saving money. These 529 plans are sponsored by educational institutions, state agencies, or state governments, so they will differ based on where you live and where your kids are planning to attend college.
Review Life Insurance
If you’re a new parent who has life insurance, make sure your life insurance policy allows your kids to be the beneficiaries if you die. Even if you’re not a new parent, you should check that your life insurance policy is structured in the most advantageous way possible. (And, of course, if you don’t have life insurance, you should absolutely consider buying it).
Again, this list is by no means the be-all, end-all of keeping your kids protected. When it comes to estate planning, there are a lot of ways that you can help your family’s specific situation. Contact an estate planning attorney today and find out more about our services.