Most people think an estate plan is for rich, old people.
But the truth is if you have a young family, you need an estate plan. Full stop.
Here’s how an estate plan protects your kids.
Why you need an estate plan
If you and your spouse go down in a plane crash while the kids are staying with grandma and grandpa, guess who will decide who takes care of them?
Grandma and grandpa?
Your sister?
Your in-laws?
Nope, nope and nope.
The State of California will decide for you!
Some random judge that has never met you or your family will decide who takes care of your kids and who gets your money.
It’s called probate court. It’s the court that decides what happens to your children (and stuff and money) if you’re gone…
…unless you have an estate plan. Then a probate judge doesn’t make any decisions for you.
If you have an estate plan, YOU decide what happens to your kids and stuff and money if you’re gone.
WARNING! A will is NOT the same as an estate plan.
A will is just a suggestion made to the probate judge. She’ll take it into consideration, but she’s not legally required to follow it.
What exactly is an estate plan?
So now what you know you need one, how does it actually work?
A better term for an estate plan would be an “instruction manual“.
An estate plan is actually a collection of 3 documents that are instructions for what to do if you’re either 1) dead or 2) a vegetable. (Fun stuff, huh?)
- If you’re dead, then your TRUST document is your instructions for who takes care of your kids and who’s in charge of your money until the kids get it.
- If you’re a vegetable, your POWERS-OF-ATTORNEY documents are your instructions for who makes decisions on your behalf while you’re incapacitated.
- And your ADVANCED CARE DIRECTIVE instructs your caretakers whether to pull the plug or not if you’re a vegetable.
3 steps to create your estate plan
Step 1: Decide
The first step is to make some decisions.
- Who will take care of your kids? You want to pick a primary and a backup for your guardians. And if you live in California and you pick out-of-state guardians, you need some temporary in-state guardians. (The process to give them custody can take up to 6 months)
- Who will handle the money for your kids? The legal term is “trustee” and you want a primary and a backup. The trustee is often the same as the guardian, but it doesn’t have to be.
- What can they use your money for? Don’t worry about healthcare, education, maintenance, and support. That’s called the HEMS standard and it’s already included. We’re talking about when do you want your kids to get their cut? i.e. 33% for their wedding at 28, 33% for a down payment at 34 and the last 34% at 40 to help raise THEIR kids?
- Who will make financial and medical decisions for you if you’re a vegetable? The legal term is “power-of-attorney” and often your financial POA is the same as your medical POA, but it doesn’t have to be. You’ll want a primary and a backup.
- Pull the plug? If you’re old enough to remember Terry Schiavo, you’ll know why this is important. Leaving this decision to your family is an incredible burden on them and if there’s a disagreement with what to do, it can literally tear families apart.
Step 2: Talk
The people you choose have no legal obligation to raise your kids or manage your money. So you want to know if they’re up to the task if god-forbid they are called upon to do so.
You may find that your sister would raise your kids, but she’d want someone else to shoulder the burden of managing the money.
Or you may find your friends are thinking of moving back East and you wouldn’t want your kids raised anywhere, but California.
So make sure you talk to your “people” before drafting it into a legal document.
Step 3: Hire
The final step is to hire an estate attorney. After completing steps 1 and 2, you’ll be incredibly prepared and having an attorney draft the documents will be smooth sailing.
Also, since you’ve been thinking about these decisions for a while, it will all make way more sense when you encounter the inevitable lawyer-ese.
WARNING! Only hire an actual estate attorney!
Many attorneys who draft estate plans are general litigators. They do “estate planning” as a side hustle for extra cash. DO NOT WORK WITH THEM! You want an attorney who only works with trusts and estates. This is important stuff and you need an expert.
Ask your friends and coworkers for referrals. If you live in California, we work with a couple of fantastic estate attorneys. Click here to contact them.
After you hire your attorney, they’ll take care of the rest. You’ll usually meet with the attorney twice – once to discuss your decisions and once to sign your documents.
How much does an estate plan cost?
In California, you should expect to pay around $3,000 for your estate plan. Outside of California, it could be half that.
That said, it’s a once in a lifetime fee. You may pay more if you need to make big changes, but most estate attorneys will make minor revisions for free.
And if you need major revisions, they’ll charge their hourly rate – usually $200-300/hr.
How Financial Zen can help
We are not attorneys, nor do we play one on TV. However, we are intimately involved in the process.
- We start by helping our Financial Zen members understand how it works and how it applies to them.
- After we guide them through their preliminary estate planning worksheet, then we’ll coordinate and schedule a meeting with the estate attorney.
- Then we accompany our members to their meetings with the attorney to help cut through the lawyer-ese and add color to their situation.
- After the attorney drafts their estate plan, we’ll sit down and review it with our members to ensure everything was captured correctly.
- Then we’ll accompany our members to the 2nd meeting to sign and notarize the documents.
- Finally, we’ll help our members update their accounts and beneficiaries to the name of the trust.
In conclusion
You need an estate plan to protect your kids and your money. It ensures both will end up in the right hands if you’re gone.
It’s not optional. An estate plan is an absolute necessity for all parents.
If you don’t have a trusted advisor to accompany you on your journey to developing your estate plan, then schedule your Discovery Call with us.
It’s literally our job to help you with this stuff.
