Hudson Valley
Estate Planning

Secure Your Legend

Estate Planning for Young Parents

Estate planning is not just for senior citizens. If you are married, have children, and own a home, you need answers to these questions:

  • If one parent passes on, could the remaining parent afford the mortgage?
  • If both parents pass on, how would the children be cared for personally and financially?

Using the example of a family with a Mom, Dad, one child, and a mortgaged family home, here is what I generally recommend to young parents:

  • Term Life Insurance: Both parents take out a term life insurance policy on themselves, making the other the primary beneficiary and a trust benefiting the child the secondary beneficiary. At minimum, the term is the number of years left on the mortgage of the family home and the amount is enough to pay off that mortgage.
  • Second-to-Die Insurance: The parents combine to take out a single second-to-die term life insurance policy, with a trust benefitting the child the primary beneficiary of that policy. 
  • Wills: Both parents sign wills making the other the primary beneficiary of any assets, making the child’s trust the secondary beneficiary, and spelling out who should be the child’s guardian if neither spouse survives. I also generally recommend that the guardian be a person likely to live until the child reaches self-sufficiency.
  • Child’s Trust: Appoint a trustee likely to live until the child reaches self-sufficiency but is not one of his or her parents. Alternatively, appoint a corporate trustee, likely through a local bank’s trust department. Provide the trustee with powers to make distributions benefitting the child’s welfare, housing, and schooling (including paying off mortgage on the family home) until the child reaches self-sufficiency.

Seem overwhelming? It doesn’t have to be. Take the first step by scheduling a free consultation with me.