Protecting Your Family With Estate Planning

Wealth Advisor

In this video, Ben Ruttenberg addresses the crucial aspects of estate planning tailored for young families and individuals. He begins by emphasizing the importance of maintaining a net worth tracker for a clear financial overview, then delves into essential estate planning documents such as wills, which dictate asset distribution post-mortem, and powers of attorney for medical and financial decisions in case of incapacitation. Further, Ruttenberg introduces the concept of a revocable trust, a strategic tool for asset management and distribution, especially for families with minor children, highlighting its benefits like avoiding probate and ensuring assets remain within the family line. He advises on the designation of trustees and guardians for minors, underscoring the necessity of aligning beneficiaries on all accounts with one’s estate plans to prevent discrepancies. This comprehensive guide serves as a primer for young families navigating the complexities of estate planning, ensuring their financial health and the future security of their assets and loved ones.

Video Transcript

You in this video, we’re going to talk through some estate planning considerations for young people or young families. Maybe you’re married and you have young kids and you’re wanting to figure out what estate planning documents should I have, what is important? What do I need to consider? So a couple things to think from a checklist standpoint, and then we’ll get into some actual documents that would be helpful to put in place. And this is not necessarily even for estate planning. This is just a good tracking sheet to have for overall, a good measure of financial health. Number one, keep a net worth tracker. So make sure you’re tracking your assets, any retirement accounts, investment accounts, any real estate, have like a monthly tracker of what these balances are, what you’re contributing to them, things like that.

 

Make sure you understand what your liabilities are, student loans, mortgage, et cetera. So always kind of keep a net worth tracker to have a good understanding of what your net worth is, how your assets are growing, how are you paying down your liabilities, et cetera. From an actual estate planning standpoint, first document we want to make sure we have in place are wills. So wills essentially just dictate what happens to your assets when you pass. So if you die without a will, it is essentially up for the courts to decide on your behalf where your assets are going and how they are dispersed.

 

The nice thing about a will is that you can actually name what’s called an executor of your will, and they would help essentially wrap up your estate, help gather any important documents, help make sure that once you pass, your assets are actually distributed and flow to the appropriate parties. So want to make sure that you have wills in place. If you’re a married couple. Again, each of you have your own will, and you can help dictate what happens to your assets when you pass. The second documents we want to make sure are in place are what are called powers of attorney. And there’s a couple of different forms of this, the first one being medical and the second one being financial. So these would be important conversations to have.

 

Again, powers of attorney means that you are essentially dictating someone to help make medical and financial decisions on your behalf if you are incapacitated and unable to. So again, without these documents in place, there would be no person of record to help make important medical decisions or important financial decisions on your behalf. So, wills, number one, powers of attorney. Number two, another potential thing that we want to make sure is put in place. Let’s say you’re a married couple. You have young children. And one of your concerns is, hey, what happens to my assets if both of us pass? Well, a good estate planning tool to consider would be a revocable trust. And what a revocable trust is essentially a document that you and your spouse would write while you’re living and help direct assets to once you pass.

 

So that once the revocable trust is put in place, an important thing to note would be it can be labeled as a contingent beneficiary on some of your accounts. Let’s assume that there is a life insurance policy in place and spouse two is the primary beneficiary. So if spouse one dies, the life insurance policy flows to spouse two. Let’s assume spouse two also dies. Well, we want to make sure that the revocable trust is listed as the contingent beneficiary. So the proceeds from the life insurance policy would then flow into this revocable trust. And in this way, you can dictate how the assets are distributed. And there’s a couple of advantages of the revocable trust that we’ll get into now.

 

So once money flows into the revocable trust, you can then label again, you do this while you’re living, but you’d label a trustee to help oversee and manage the trust proceeds. So the trustee itself, this could be a family member. This could be an institution like fidelity, for example, but you would have a trustee that helps oversee and manage the proceeds for the benefit of the trust beneficiaries. So in this case, this would be your minor children. And the reason why this is so important is that assets in a revocable trust have a couple important advantages to them. Number one, they are bloodline protected, meaning that if assets flow into revocable trust for, let’s say, your son gets married and then gets it and then gets divorced, assets will never be subject to any divorce proceedings.

 

They will always stay in the bloodline. Number two, assets in a revocable trust avoid probate. Probate is a public process in which the courts decide how your assets are distributed. So any money that goes into the revocable trust avoids probate and is very private. So there’s no public record of how the assets are actually divided. So wills, powers of attorney, and then, if it makes sense, a revocable trust to be put in place so that if money does flow to minor children, it can flow directly into a revocable trust that’s overseen by a trustee. Distributions outside of a trust can be made for what are called hems provisions, that is, health, education, maintenance and support. So once money goes into a trust, it can only be used for one of those four things.

 

It’s a pretty loose definition, but they can’t just take money out and do whatever they want with it. It has to fall into one of those four categories and it has to be approved by the trustee. So in terms of estate planning considerations for young families, a will is super important. Powers of attorney are super important and potentially a revocable trust. If you have young children that could potentially be inheriting money, other considerations to always want to make sure you’re looking into in regards to estate planning. Number one, check your beneficiaries on your accounts so you can do all the right planning in a will. You can write a great will that directs assets to how you want them to be directed. But if your beneficiaries don’t align with your will, the beneficiary will always trump whatever is shown in the will.

 

So if these haven’t been updated in a few years, want to make sure that these are updated in line with your current wishes. And then if you have young children, you want to make sure hey, who is trustee of your trust? If you do form a revocable trust, and then who would be guardian of your minor children as well? Once they turn 18, they can be their own trustee and they won’t need a guardian. But if they are under 18, those are considerations that need to be discussed. These are some important considerations for estate planning. Again, wills, powers of attorney, revocable trust, double checking your beneficiaries and then always having an up to date net worth tracker that is handy and that you can reference whenever you need to.

 

So if you have any questions about estate planning, please feel free to reach out. We’re happy to help you.

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