It was a question I had been anticipating for years. But when it came, it still stopped me cold.
“Where will I live if you die?” my then eight-year-old daughter wanted to know.
My husband and I don’t relish talking about our deaths. But because we had already established an estate plan that included contingencies for this type of scenario, we were able to assure our daughter that a Dickensian future did not await her or her older brother.
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We walked her through the possible scenarios, depending on how old she and her brother would be. We also talked about money, assuring her that our planning included enough money for both to continue living in our home and going to the same schools, in addition to having enough money for college. We want to be there for them throughout their lives, even if we can’t actually be there.
Making The Best of a Terrible Situation
The job of every parent is to prepare our children for life without us. Unfortunately, for some children, that comes tragically early. My personal estate plan aims to make the best of a terrible situation, while I continue to pray that it never comes to pass.
And yet I see many families failing to do the same. Maybe they are uncomfortable confronting their own mortality or they think it’s something that won’t happen to them. According to one Gallup poll, just 46% of Americans have a will. And when it comes to more advanced planning, that number is even lower.
Among my clients, the people who are the most committed to estate planning are those who lost a parent prematurely. A lack of proper planning unnecessarily compounded their loss. They describe uprooted childhoods and stressed-out surviving parents suddenly having to raise a family on their own. They want to make sure that their own children don’t have to go through the same trauma.
Everyone should follow their example.
Estate Planning: Not Just For The Old or Wealthy
Maybe when you think of estate planning, you have images of a silver-haired couple leaving their riches to children, grandchildren and charities. In reality, estate planning is a lot less glamorous. Plus, you don’t have to be old and wealthy to do it.
The average life expectancy in the U.S. is 76 years old, with men living an average of 75 years and women living to age 80. The chances of a 30- or 40-year-old dying before reaching those ages is low, but it’s not zero. Haven’t we all heard the story of the 42-year-old dad who suffers a sudden heart attack after a session of snow shoveling or the 35-year-old mom diagnosed with advanced ovarian cancer?
These stories are rare, but frequent enough that we’ve all witnessed them. As parents, it’s our job to think of the unthinkable. That’s why I always advise my clients to do estate planning right after the birth of their first child. But if that time has passed and you didn’t do it, don’t dwell on the past. Dive in now and plan for where your family is today.
Start With The Basics
At a minimum, every family needs a will, which is a legal document that spells out what will happen to your underage children and who will care for them if you die. A will also can address how your assets will be distributed.
If you die without a will, a court will decide about guardianship for your children and how your money will be distributed. In many cases, courts favor children going with their next of kin. Is that always the best thing? Maybe a friend or a second cousin is a better choice. A will lets you name the person you believe can do the best job in your absence. Just make sure that you have candid conversations with your chosen guardian before assigning them to the role.
An estate planning attorney can draft a will. Fees vary depending on where you live, but you can expect to pay a few hundred dollars. Sometimes you can get free estate planning forms from your local or state bar association or from a local non-profit law firm. Providers like Trust & Will and LegalZoom give you more sophisticated documents, including trusts, for not much more.
Since we are a blended family, we chose to work with an estate planning attorney to capture the complexity of our situation. We paid $1,100 for a detailed will and the establishment of several trusts that will be used to pay for our children’s expenses.
Life Insurance is a Must
In addition to a will, you also need to get life insurance. The younger you are when you buy it, the more affordable it will be. According to Progressive, a 30-year old can buy a $1 million policy for 20 years for about $43 a month. At 40, however, that same policy jumps to $61 a month. Men typically pay more than women for the same policy. And rates are higher for people with medical conditions.
Think a $1 million policy is too much? Think again. If you tally up all the money your family would need if you were no longer there to earn it, you will likely come up with a figure that’s bigger than $1 million. Generally, I advise people to get a policy that’s five to 10 times their salary, but if you have special circumstances—like a child with special needs or a lot of debt—you might need more.
Use an online calculator to figure out how much life insurance you should get.
Plan For Changing Circumstances
What makes estate planning so difficult is that it’s hard to envision every possible scenario that could happen to your family through the years. It’s important to stay flexible. That’s why we revisit our estate plan every few years to check that it still makes sense. I think an estate plan needs to be updated at least every five years, and certainly any time there’s a major life change like a birth, a marriage, divorce or death.
Because our children have such a big age difference, we could foresee a situation where our son would be old enough to care for his younger sister. At the same time, we don’t want to burden him from pursuing his dreams, so our estate planning documents make provisions for another guardian. In either case, our trusts provide enough money for that to happen.
We also wanted to take our planning out beyond our kid’s childhoods. Because we value education, our trusts will provide enough money to pay for higher education. In addition, they will get more from their inheritances if they get good grades. We’ve also got provisions in our trust to help with a down payment on a home or for starting a business. We want them to know that we will be by their side no matter where life takes them.
Planning is Love
I acknowledge that these plans, no matter how carefully crafted, are cold comfort in the face of a major loss — but they are comfort. I will take care of my health and make wise life choices, but some things are out of my hands. At nine years old, my daughter accepted this. Knowing we have a plan calmed her fears. Seeing the fear lessen in her eyes, calmed mine.
MORE ON HERMONEY:
- 5 Must-Dos to Put on Your Estate Planning Checklist
- What You Need To Know About Changing Your Estate Plan
- 5 Shrewd Secrets from Women Who’ve Fixed Credit, Paid Debt, and Made Fortunes
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