I know what you're thinking. "What do you mean my kids aren't protect? I have all of the safety equipment, the safest car on the market, my house is baby-proofed. I live in a safe neighborhood. I have a reputable babysitter and daycare. How could my kids not be protected?"
Those things mentioned are all very important, and I'm sure you've spent hours online looking for the best for your children. But all of those things are directed at protecting your kids while you're still around. But, what happens when you're gone? What will happen if you and your spouse get in an accident on the way home from "date night" and don't show up to pick your kids up from the babysitter? If you haven't planned for what will happen when you're gone, you kids aren't protected. But, there's good news. It's not too late!
Here are 5 Ways to Protect Your Kids, Now!
1. Designate a Temporary Guardian
If you are in an accident and are left incapacitated (i.e., still alive but unable to make decisions or take care of yourself or others), not only will your kids be sad and scared, they'll need someone to take care of them in your absence. If they're with the babysitter or at daycare, who will be called to pick them up? What about after that? Who will care for them if you're in the hospital for an extended period of time?
Without proper planning, the police or Child Protective Services will take custody of your children until a guardian can be appointed to care for them. Not only are your kids scared and sad because you're gone, but now they're in an unfamiliar place with unfamiliar people.
With proper planning, you can appoint a temporary legal guardian for your kids, to take care of them while you recover. It can be a family member or friend who knows your parenting style and what you feel is important to care for your children. It saves your kids from ever being taken by the police or CPS. It allows you to make these decisions ahead of time, to notify the babysitter/daycare who to call just in case, and allows your appointed guardian to present a legally binding Standby Guardian designation to the proper authorities to take your kids home with them right away.
2. Designate a Permanent Guardian
What if that accident was worse and you never make it home? A temporary guardian isn't the key anymore - now your kids need to someone to raise them, to teach them about life, and to pick up where you left off.
Without proper planning, family members will likely fight over who is best equipped to raise your kids, they'll take the issue to Court and a judge will have to decide what's in the "best interests" of your kids after barely meeting them. You didn't leave behind any guidance on who should raise your kids, so the Court has to figure it out themselves. Maybe a relative who has no business raising your kids - someone you most definitely would not choose yourself - ends up being named their guardian.
With proper planning, you can use your Will to designate a guardian for your children in the event you are no longer here. Unlike the temporary guardian designation above, a guardian designation in your Will covers more than incapacity. It allows you to designate someone to raise your children after you're gone. Someone to teach them what you would have taught them, someone to raise them to adulthood, someone to guide them through life. Whether it's a family member or close friend - it's your choice and the Courts will defer to your choice absent extraordinary circumstances.
3. Assign a Power of Attorney
Whoever is caring for your children will need to have the financial ability to do so. Most people do not pre-plan a budget for the possibility that they all-of-a-sudden need to care for someone else's kids - whether you let them know in advance or not.
Without planning, your kids' guardian will have to try to get by with what they have - maybe struggling to make ends meet. Maybe they have to take on another job, reducing the amount of time they're able to spend with your kids.
With proper planning, you can use a Power of Attorney to appoint an agent to act in your absence, to access your bank accounts and investments - or, if needed, sell your house - to support your kids while you're gone. Your agent can move your funds to the guardian to help reduce the burden so the guardian can focus on what's important - raising your kids to be successful people.
4. Appoint a Trustee to Help Your Children with Money
If your minor children are going to be beneficiaries of your estate after you're gone, you'll need to make sure someone is there to make sure the money is used responsibly. The law also requires a trustee to be appointed if a minor receives a gift or inheritance - and for good reason. Obviously children are not capable of making sound financial decisions, especially if they are very young. Trusts can be used to structure your children's inheritance to allow them to get distributions of assets every few years until they are well into adulthood. You could also structure the distributions around life's typical milestones (i.e., college, marriage, first home, etc.).
Allowing your children to receive a lump sum of money from your estate when they turn 18 may be irresponsible and could hurt their growth and success as adults. It's common for kids in that situation to waste their inheritance or rely on it instead of getting a job and becoming independently successful. By structuring the distribution of your assets over time, you allow your kids to become independent and ensure that the assets will be used for someone worthwhile.
5. Make Sure There's Something to Leave Your Children
Being a parent means more than just proving for your kids now. It also means providing for your kids in the future - and if you leave this world before they're grown. This can be done in many different ways:
- Save Save Save! Leave behind liquid assets for your kids by saving your extra money in an interest-baring account.
- Designate a Beneficiary for Retirement Accounts! Your 401(k), IRA, or Roth IRA are considered "payable-on-death accounts", meaning they are transferred to your designated beneficiary. If you want your account to be paid to your kids, make them your designated beneficiaries.
- Life Insurance! Just like your 401(k), your life insurance accounts are "payable-on-death" and require a beneficiary designation. Term policies are cheap, especially when you're young(er).
- Home Equity! Pay down your mortgage and your children can benefit from the equity in your home. If the house is sold, they can keep the equity. Or, they can use other assets to pay off the mortgage and keep the house.
- Investment Accounts! Some investment accounts act like savings accounts and other act like retirement accounts after your death. If it requires a beneficiary designation, make sure it's filled out.
Regardless of how you do it, you want there to be enough money or assets there after you're gone to help get your children to adulthood without them wanting for anything or being a burden on their guardian. Smart planning can make sure you leave more than enough behind and in a way that best helps your kids become successful adults.
Your kids are the most important part of your life and you want to make sure that they are protected, no matter what.