When the topic of estate planning comes up, it is often in the context of saving taxes, making gifts, protecting assets and discussions of incapacity.  Naturally, the most interested audience for these topics are those over age 50 or those approaching retirement. But estate plans are necessary for anyone who has the possibility of getting sick or dying, and the last time I checked, that includes all of us.

Let’s begin this rarely discussed topic by talking about your children. Let’s break it down into two categories, children with assets and those without assets. If a child has investments, savings or any assets of value, the parents of that child should consider an alternate form of ownership of these assets other than directly in the child’s name. While the likelihood of a young teen getting very sick or passing may be remote, it is not impossible.  Consider using a trust to own these assets.  In a trust for a child under 18 there must be another trustee.  This may prevent the child from blowing the money and also help to protect the assets in the event of a big problem in that child’s life, whether from health care or liability.

After the child reaches 18, she can legally be the trustee, but that still may not make sense.  If an independent trustee such as the parent remains as the trustee, these assets may remain protected.  If the assets in the trust are material and in held in a protected entity, they wouldn’t be available to settle the marital estate in the event of a future divorce.  Should your child decide to marry, this trust helps make the difficult discussions of a pre-nuptial agreement much less significant.

While your child is under age 18, the parents or custodial parent would be the child’s legal representative for all matters including health care. But once the child reaches 18, they are considered adults in most states and while the parents are frequently consulted in matters of health care, there is no guarantee that your word will matter. Therefore any child over 18 should have their own health care proxy or health care power of attorney.

The need for a will also exists for anyone over age 18.  This need is mitigated if the child has no assets or the assets are placed in trust as long as your 18+ year old does not have any children of her own.  If there are grandchildren involved, then your child absolutely needs a will to appoint a custodian for your grandchildren.

In real life, it is sometimes difficult to motivate older people with assets who need to update their estate plans to get it done.  No one likes to talk about their demise and all the possibilities that need to be addressed. So I know that talking to an 18 year old is probably one step harder. The best way to get it done is to take them by the hand to your advisors office, and get started – on your dime of course!

By John P. Napolitano CFP®, CPA, PFS, MST Founder & Chairman Read More