We all want the best for our kids and families. Whether it’s with better financial planning, or getting your will in order, it matters. Don’t let things fall to chance. Attorney Shannon McNulty shares her tips about the legal and financial protections you should be providing for your children.
As a parent, protecting your children from harm is always top of mind. Preventing a toddler from falling down the stairs, making sure your child looks both ways before crossing the street, and requiring a helmet when riding a bicycle are virtually second nature.
Sometimes, however, potential harms aren’t so obvious and can result when something happens to YOU that directly affects your children. Having a plan in place in the event of your death or disability is a critical part of protecting your family.
A comprehensive legal and financial plan can serve as a lifeline for your family if something goes wrong. We’ve come up with seven things every parent should have in place to protect your family in the event of misfortune. Below are the critical legal documents that every parent should have to protect their family in the event of death or severe incapacity.
Will: A will serves two vital functions for parents with young children. First, it ensures that your assets will be left to the loved ones named in your will. Just as importantly, your will designates the person you choose to serve as guardian for your children if necessary.
Trust: A trust works together with your will and serves many functions. A trust can:
- Prevent your children from having access to a substantial inheritance at the age of 18;
- Keep details of your children’s inheritance out of the public record;
- Protect the inheritance from future spouses and other potential creditors;
- Avoid court interference with the administration and distribution of assets to your children; and
- If you have more than one child, a trust can ensure that your assets would be allocated according to each child’s needs.
Standby Guardianship Designation: The guardianship designation in your will is valid only when the will has been submitted to probate. The designation in your will would not protect your children in the event you were incapacitated if, for example, you were unconscious in the hospital. A standby guardianship designation authorizes someone to immediately assume legal guardianship of your children in this situation. In some states, the standby guardianship designation is included in your power of attorney.
Power of Attorney: A power of attorney is a legal document that designates a trusted person to manage your finances in the event that you were incapacitated. For example, if you were in an accident and ended up in a coma for a period of time, the person designated in your power of attorney would be able to pay bills and manage your finances during that time. This document is particularly important for parents who have young children to support. It can ensure that important family expenses, such as your mortgage, your children’s private school tuition, and your kids’ nanny continue to be paid while you’re not able to make the payments yourself.
Healthcare Proxy: A healthcare proxy authorizes a trusted person to make healthcare decisions for you if you are unable to make those decisions for yourself. A healthcare proxy can ensure that your wishes are respected with regard to end-of-life measures and also make those difficult decisions easier for your family members.
Financial Planning: The legal documents above set forth the structure for how your assets would be managed and to whom they would be distributed. Financial planning is necessary to ensure sufficient assets are available to support your family.
Life Insurance: Unless you have substantial wealth that could support your family if something happened to you, every parent should have life insurance, so that sufficient resources would be available to take care of your family if they no longer had your income to support them.
Disability Insurance: It is more likely that you would suffer from a disability than die at a young age; however, many people underestimate the risk and consequences of developing an injury or illness that leaves them disabled for a long period of time. Having proper disability insurance ensures that your family will be able maintain a similar lifestyle even if you’re unable to work.
While we can’t always prevent a fatal accident or illness, we can take steps to ensure that our children would receive the best care possible in the worst of circumstances. If you haven’t already done so, talk to a financial advisor or estate planning lawyer about putting a plan in place for your family.
Shannon McNulty is the founder of the Law Offices of Shannon P. McNulty, a boutique law firm in Manhattan that caters to the legal planning needs of parents with young children. Shannon received her law degree from Georgetown University and an LL.M. in Taxation from New York University School of Law. In addition to her law practice, Shannon founded the website Savvy-Parents.com, an online resource that provides parents with unbiased advice regarding legal and financial issues so that they can make smart decisions for their families.