There are many reasons for people with kids to develop an estate plan.

There are many reasons for people with children to develop an estate plan. An estate plan generally refers to a Will, a financial Durable Power of Attorney, a Health Care Power of Attorney, a Directive to Physicians (commonly called a "Living Will"), and Powers of Attorney for Minor Children's Health Care.

The Will is a critical document which designates how the testator, or maker of the Will, would like to distribute their estate assets after their death. Married couples, in most cases, leave their estates to each other upon the first spouse’s death. It is expected that the surviving spouse will use the inherited assets to care and provide for the surviving children. When both parents die and leave minor children, the distribution of estate assets becomes more complex. The following issues should be considered by parents when making their Will:

* Who will care for minor children in the event both parents die? Naming a guardian in the Will provides the best evidence of who the parents would like to make decisions for their children. When deciding on a guardian, parents should take into account the proximity of the guardian’s residence to the children’s current home, the lifestyle and religious beliefs of the guardians, and the financial situation of the guardian. Parents should name the same guardian in their Wills so as to avoid any confusion in the event both parents die simultaneously. Being the guardianship of minor children is a major responsibility, and parents should be sure to ask their preferred guardian if they would be willing to care for the children in the event of a tragedy.

* How will the estate assets be transferred to the child? If the parents have no estate plan in place, upon the death of both parents, the child would inherit their share of the parents' estate, and it would be held in a guardianship estate of supervised by the court. The child would have access to the monies by requesting distributions from the guardian, who would need court approval to spend principal from the estate. Additionally, once the child obtained age 18, all assets in the estate would be distributed directly to the child regardless of the child’s ability to manage the money. If parents engage in estate planning, they may create a Trust to hold assets passing to a minor child. The parents, via their Will, create a Trust and name a Trustee to manage, invest, and distribute the assets to the minor child according to the terms of the Trust. The Trust may allow distributions for the child’s health, education, maintenance, and support throughout their life. The Trust terminates at a stated age of the child and does not automatically end upon the child’s obtaining the age of majority. Thus, the Trust may end when the child turns 30. Alternatively, the Trust may distribute principal in increments based on the age of the child. For instance, the child would be entitled to 1/3 of Trust principal at age 25, another 1/3 at age 30, and the final 1/3 at age 35. The Trustee need not be a corporate Trustee, and in the event of a smaller estate, it would make better financial sense to name an individual as Trustee (who may be the same person as the guardian). The individual Trustee could then hire an investment advisor to handle the investment of trust assets.

Parents of a child with special needs should create a Third-Party Funded Special Needs Trust to hold assets for the child with special needs in lieu of a simple Trust. This Special Needs Trust is typically funded with inheritance monies of the child with special needs, and does not, under current law, have a payback to the state for medical assistance provided to the child.

* Who will administer the estate in the event both parents die? The surviving spouse is typically named as Personal Representative of the estate, and a successor Personal Representative should also be named in the event the spouse is unavailable. A Personal Representative must be over the age of 18 and is responsible for gathering the assets of the estate, liquidating and selling any assets, and distributing the assets to the heirs under the Will. Each spouse may name their own successor Personal Representative to administer their estate, and co-Personal Representatives may also be named.

To complete the estate plan, parents execute financial and health care Powers of Attorney and a Directive to Physicians. Powers of Attorney allow an individual, or principal, to appoint an agent to act on their behalf for financial and medical matters for the principal or the principal's minor children.

A Directive to Physicians sets forth an individual’s last wishes in regard to end-of-life situations. This document differs from a Health Care Power of Attorney in that the Directive only governs a situation where a doctor has certified that the declarant is in a state of permanent unconsciousness or has an end-stage medical condition.

Parents with young children should consider drafting an estate plan to ensure that their estates are administered according to their wishes, and that their children will be cared for financially and be placed with an appropriate guardian. If you have questions about creating an estate plan, give us a call at 253.858.5434 to set up an appointment today. We represent clients throughout Washington and Idaho and are available to meet in person, by phone, or via video conference.