Estate Planning for Parents with Minor Children in Wisconsin
A common misconception about estate planning is that it is primarily for older, wealthy people. In fact, estate planning is beneficial for adults of all ages to help ensure your wishes are met for your family and heirs. It is especially important if you have minor children.
Estate planning is a process that allows you to make decisions about your assets and your family should you pass, become incapacitated, or even if you get divorced. An estate plan includes Wills, Trusts, Marital Property Agreements, Powers of Attorney, and other ancillary financial and healthcare planning documents.
What are common reasons that parents of young children decide to create an estate plan?
An estate plan is essential in planning for the protection, placement, and support of young children. It accomplishes other goals, as well, such as distribution of your assets. An estate plan gives you peace of mind that your estate administration will go as planned.
Couples and individuals with young children often choose to establish an estate plan for the following reasons:
- To nominate an individual who they trust to be in charge of administering their estate
- To select a guardian for their children
- To control where assets, such as a home, vehicles, and family heirlooms can pass – whether it is to the guardian, to the living parent, or in a Trust for the benefit of their children
- To create a Trust so they can control how and when the children will inherit the assets
- To set up a Special Needs Trust if a child (minor or adult) has disabilities that require lifetime assistance
- To address a variety of scenarios, such as who will care for your children during a long-term disability of a living parent
Are there certain circumstances that might prompt parents to establish their estate plan?
Parents don’t need any special reason to create an estate plan, but many consider it when certain scenarios occur. Common examples are when both parents are planning a trip without their children, when one parent passes away or is seriously ill, or when a single parent is having surgery.
Frequently, younger couples will decide to establish an estate plan following the passing of their own parents. That’s because they see first-hand how complicated it can be to administer an estate, especially one without estate planning documents. Other couples decide to create an estate plan at the suggestion of their own parents, or if they offer to help with attorneys’ fees.
What happens if a couple does not have estate planning documents and leaves behind minor children?
Upon the death of the first parent, if there is no estate plan, it is likely (but not guaranteed) that all of the assets will pass to the surviving spouse.
(It is important to note, however, that there are circumstances in which the distribution to a living parent might not be ideal. Some examples include second or subsequent marriages, or where the surviving spouse is not the parent of the minor child, or when the surviving spouse is incarcerated or incapacitated.)
Upon the death of the second parent, if there is no estate plan, the laws of Wisconsin will control the administration of the estate and the disposition of the assets.
Thus, the inherited assets will pass in accordance with the laws, which are not always in agreement with the parent’s wishes, especially in a non-traditional household. The monies will have to go through the court system. It is the court that will oversee and make decisions regarding a guardian of the children, who is in charge of the estate and the children’s finances, and many other decisions that parents prefer to make on their own.
For these reasons, it is important that parents of minor children have an estate plan in place.
How do children acquire assets from their parents if they are not yet adults? Where does that money go?
If a child is a minor, they cannot inherit monies from their parents outright. If the parents did not have an estate plan, the money will pass into a custodial account. The custodian holds the monies in the account until the child reaches the age of majority, which is 18 in Wisconsin. At that point, the monies are distributed outright to the adult child.
A better option is to create Trusts for the children (as part of their estate plan) that are created after both parents have passed. Parents can elect someone of their choosing to be in charge of administering the Trust and distributing monies to the children for healthcare, education, maintenance, and support.
Also, parents can elect to keep their children’s inheritance in the Trust for a longer duration of time, and include distributions that span the children’s lifetime. The parents can also allow their adult children to receive the monies outright at whatever age the parents decide, such as after they graduate from college or in their late twenties. There are numerous options in setting up these Trusts, and parents can change the provisions of the Trusts as the circumstances of their own and their children’s lives change.
What are some common estate planning strategies for parents of minor children?
Since each family has its own dynamics, it is important that couples are strategic in how they plan for their estates, especially when young children are involved.
Common estate planning strategies for couples with young children include:
- Setting up a Will or Trust, which includes choosing guardians for minor children and determining how and when the parents’ assets should pass
- Selecting highly trusted individual(s), including backup individuals, to be in charge of the estate administration
- Setting up Financial Powers of Attorney to nominate a trusted individual to be in charge of the family’s finances and children in cases of long-term disability of a sole living parent
- Setting up a Marital Property Agreement to classify property brought to the marriage and accumulated during the marriage
- Revisiting an estate plan every three to five years or any time there is a birth, death, marriage, or divorce in the family
- Reviewing the choice of guardians periodically to ensure the individual(s) are still able and willing to raise the children
- Revisiting the choice of an estate’s executor
- Reviewing assets, including valuation, titling, and beneficiary designations
- Reviewing debt and how it should be handled through the estate plan
Parents should review and update their estate plans as frequently as the circumstances of their lives require so. As the children get older, or if the individuals named in the Will are no longer the best choice, couples might wish to make significant changes.
What should couples know to get started in making an estate plan?
There is a much to consider when it comes to making an estate plan, especially for parents of minor children, but it does not need to be overwhelming. Here are some helpful starting points:
- Carefully decide who you want to take care of your children and who should handle your finances if you become incapacitated or pass away.
- Take an inventory of your assets and decide how you want them to be handled or distributed. Consider beneficiary designations on financial accounts, retirement accounts, and life insurance, as well as titling of assets.
- Discuss with your spouse if there are assets you would consider to be your own (such as a financial account, a home, vehicle, or jewelry) that you would like gifted to someone other than your surviving spouse. This is especially important in second and subsequent marriages. If this separation of assets has been addressed in a Pre-Nuptial Agreement, it should be reinforced or updated in an estate plan, as well.
Contact the Wisconsin estate planning lawyers at Murphy Desmond S.C.
Murphy Desmond lawyers are experienced in setting up estate plans for couples and individuals at all stages of life. We can help establish an estate plan that meets your wishes and complies with state and federal laws to help reduce tax liability. The peace of mind that comes with a strategic and buttoned-up estate plan is worth your time, and can be more affordable than you would expect.
Contact the Wisconsin estate planning lawyers at Murphy Desmond S.C. at email@example.com or 608.257.7181. We have offices in Madison, Janesville, Appleton, and Dodgeville, Wisconsin, and are available to assist you virtually or in person as necessary.
Published March 2, 2021