Estate Planning When You Have Young Children

Four simple steps to protect your family.

By , J.D. · UC Berkeley School of Law

Having children complicates life in many interesting ways, and estate planning is no exception. Young parents don't need anything fancy, but there are a few things you should definitely think about. Here are four simple steps to take.

1. Write a Will

For most young parents, writing a will is less about leaving their assets than it is about naming guardians for the kids. The guardian you name in your will is the person who would take over if both you and the other parent were unavailable to raise your children. That's very unlikely, but worth addressing just in case.

If your children ever needed a guardian, the local court would appoint the person you nominated in your will, absent a serious problem with that person. You can name different guardians for different children if you wish.

If you haven't made your wishes clear in your will, however, the court would have to choose someone without any guidance from you. The common choice is a family member. But what if you really wouldn't want certain family members to raise your children? Or if you would prefer that a close friend, who has a good relationship with your kids, step in as guardian? The court wouldn't have any way of knowing.

Many, many parents get stuck when they go to choose a guardian—after all, no one likes even thinking about someone else raising their children. And parents sometimes discover that they disagree about who would be best. For tips on how to overcome common roadblocks, see Naming a Guardian for Your Child: Problems and Solutions.

The other big reason to write a will is that if you don't, and if one of you died, some of your property might go not to your spouse, but directly to your children. (It depends on state law.) When given a choice, most people prefer that the money go to their spouse, who will use it for the kids.

Writing a simple will can be easy, quick, and inexpensive. Unless you own unusual assets or have an otherwise complicated situation, you can probably just do it yourself, without a lawyer's advice; try Nolo's bestselling Quicken WillMaker & Trust.

2. Buy Life Insurance

This is more of a financial planning task than a legal one, but it's good to address when you're thinking about taking care of your kids. Buying a life insurance policy that would replace your earnings for a few years is a great way to ensure that if you or the other parent died unexpectedly, the survivor would quickly have access to cash to help support the family.

Term life insurance, which stays in effect for a set number of years, is often a good choice for young parents. If you're reasonably young and healthy, term insurance is cheap. You can shop for the best bargains online; several free services compare rates of many different companies.

For more about life insurance options, see Using Life Insurance to Provide for Your Children.

3. Write Durable Powers of Attorney and a Living Will

Every adult should have an advance medical directive (living will) and durable powers of attorney for health care and for finances. If an accident or sudden illness strikes, these documents will make things much easier for your family.

In your living will or advance directive, you set out your wishes for end-of-life care. (A living will is nothing like a regular "last will and testament" in which you leave property and name guardians for children.) Your document can be as detailed or as general as you wish. For example, you might simply say that you want everything necessary to relieve pain (called palliative care or comfort care) but don't want to receive extraordinary measures such as CPR in certain circumstances.

In a durable power of attorney (DPOA) for health care, you give a trusted person the authority to carry out the wishes in your advance directive, and to make other medical decisions if you can't. Depending on where you live, the person you name is called a health care agent, attorney-in-fact for health care, health care proxy, or surrogate.

A durable power of attorney for finances works like a DPOA for health care, except it gives someone authority over your assets. This can be a big benefit to family members—your spouse might need quick access to your checking account to pay the mortgage, for example. Without a DPOA for finances, a court order would be necessary.

If you're young and healthy, do you still need these documents? Yes—even though it's very unlikely that they will ever be used. If you were seriously injured, these documents would let your family know what you wanted, sparing them very difficult decisions and heading off disagreements. It's young people who are strong enough to live a long time with serious injuries. (Terri Schiavo was 26 when her illness began and she fell into a permanent vegetative state.)

You can use Quicken WillMaker & Trust to make these documents yourself; the program helps you produce documents tailored to your state's laws.

4. Designate Beneficiaries for Retirement Accounts

One last simple (and free) step to take is to name beneficiaries for your retirement accounts--any IRA or 401(k) account you've opened. All you need to do is fill out the beneficiary form provided by your employer or the account custodian. If you want to change it later, you can just fill out and submit a new form.

By naming a beneficiary, you make it possible for the funds in the account to go directly to the person (or persons) you name, without probate. That will save your family the hassle and expense of probate court proceedings.

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