Estate planning now with kids

With the pandemic, I felt that it was not too late to get started on estate planning, our kids being 2 and 4. A few things I am unsure about, and the research can be overwhelming/conflicting. Please let me know your thoughts on:

  • Do we need a will AND living trust? Our main assets are in the form of 401(k)'s and a few IRA's, plus our house for which we've been paying mortgage for a few years- adding it all up would not exceed 1-1.5MM (including house value). We only have our 2 kids as dependents. I am not sure at what point to decide that a living trust is needed.
  • We are considering next of kin for guardianship, but this next of kin is not a US Citizen. Should the unthinkable happen, our kids would have to move abroad, as next of kin would not be able to come here. Any special considerations for this when drawing up the documents? Does this get tricky for how kids would get their inheritance, as no one in this country would be able to manage it for them if our kids are still young? I am also thinking that our assets would go the next of kin for the purpose of caring for our children but also not sure if that also gets tricky, being that this person is a foreigner.
  • I have legal insurance through my employer. How long does this process usually take from start to finish?

TIA!

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RE: Estate planning now with kids ()

I think these are all good questions, I think a living trust is a good idea, because without one your assets would go into probate which is expensive, meaning your kids would get less. 

Also, if you and your partner were to die suddenly, you want someone to be ready to get the kids and start caring for them immediately, a person overseas is going to have to arrange flights etc.  Who will care for your kids in the meantime? Will that person be able to stay here long enough to handle everything that needs to be done for the kids and then take them over seas? It sounds like it could add more trauma for the kids, after losing their parents. 

If that is the person you want to ultimately care for the kids, you still need someone else who is local to agree to respond immediately. 

hope that helps!

M. 

RE: Estate planning now with kids ()

We went through this process when our first kid was born. It took about 5-6 hours in total (two hour-long meetings with an advisor, plus assembling paperwork and discussing want we wanted between ourselves) and $3-4K.  That price may be on the high side, but we were very happy with the attorney we worked with. We did both a living trust and will. My understanding is that the former helps you avoid probate; it will dramatically reduce the administrative burden on the executor of your estate and probably save your kids some money should the worst happen.  We've bought a house since establishing our living trust and it did not add to the complexity of the process beyond a couple additional pieces of paper/questions in the closing process. I'd talk to a lawyer about special considerations on the custody front given the citizenship of the guardian.

RE: Estate planning now with kids ()

If you are living in California, you should probably have both for the protection of the children while they are young.  You can name an executor to handle your estate that does not need to be the overseas person.  You can name a friend, an attorney, etc.  That person does not need to live in your state, but should be in the US.  It will make things easier going through probate.  Good luck and take care.

RE: Estate planning now with kids ()

We did this just before the pandemic. Yes, you need a will and a living trust. I can't remember the exact details but in CA the threshold for property that has to go through propate is very low ($50,000) or something. Putting it a living trust keeps it from having to go through all those hoops when you die.

We didn't have legal insurance at the time but using a lawyer we hired it took a month or so but most of that time was because we own property in another state that needed to be put in our trust.

RE: Estate planning now with kids ()

First, I am not a lawyer and you should definitely talk to an estate planning lawyer for this stuff. The rest of this is based on what my estate-planning attorney set up for me 8 years ago and general knowledge. My lawyer wrote up a trust and a pour-over will. A pour-over designates the trust as the beneficiary for any assets not already in the trust at the time of death. The will acts as backup for anything that you don't or can't put in the trust. For assets like retirement accounts that you can't put in a trust, you can designate the trust as the beneficiary of the account. If you don't have someone to appoint as trustee (an estate attorney can help you with the international issues!), you can hire a professional trustee (Google says this will cost you ~1% of the value of the trust per year). 

RE: Estate planning now with kids ()

I am an estate planning attorney. Here is my take on your situation. It is only in a will that parents can name a guardian of minor children. Each parent needs their own will, and should name the name person/persons. Most American children would not wish to live elsewhere. Most California children would not wish to live elsewhere either. However if a foreign person is your only nominee, it can be done. Certainly this is merely a contingency plan if you are healthy. Since you are leaving the assets to your children, not to the foreign national, there is no problem. If you leave assets to a foreign national, the Federal Estate Tax threshold is much lower, and could create a problem. Leaving assets to the chlldren, with a named custodian, is not a problem. I offer a class through the Berkeley Adult School (bas.berkeley.net) for $40 fee to the school. Next class is Saturday, 11/06. The class covers all aspects of estate planning for folks of modest means, and includes most free, and inexpensive methods of passing assets such as beneficiary statements.

RE: Estate planning now with kids ()

We were in the same boat with recently having had our first child. We ended up hiring Summerall Law to help us with our estate plan, and highly recommend them. They were covered by our legal insurance, MetLife, so it was very affordable for us.

Start to finish only took a couple of weeks, and they handle everything for you. They do everything digitally, and were very helpful in making the process as simple as possible for us. 

We also wanted one of our trustees to be a foreigner, and they advised us on how to handle that. Highly recommend at least doing a phone consult with them - the process was so easy and straightforward.

RE: Estate planning now with kids ()

Hi - I am glad to hear you are taking that step now that you have kids. I can't speak to the guardianship question, but I can tell you that if the unthinkable happened, a living trust would mean that whoever you designated to take care of your kids would have pretty much immediate access to whatever assets were needed for their care. Having only a will means that instead your estate would first have to go through probate, which is an expensive and slow process, and you wouldn't want to put your family through that. A living trust is more expensive on the front end but there are pretty clear benefits to folks who have young kids. To be clear, generally when you set up a trust it's actually a will, trust, health care directive, and power of attorney. Trusts generally deal with your big assets like your house and investments (but not your 401ks; that's a different thing), and wills deal with to how to distribute any tangible items that you wouldn't put in a trust, such as heirlooms. 

When you're interviewing estate planners you can ask them if they have experience and/or knowledge of the foreign guardianship question. As you're doing that you can ask the question about what the estate planning process is like and how long it takes. It sounds like your estate is not complex, so it should be weeks rather than months once you get started. However if things are still like they were a few months ago in the estate planning business, estate planners might still be pretty busy. For that reason I think most of the time you spend might be waiting for a first appointment. 

As far as management of assets for our child, my wife and I set up things so that the business of managing the money (conservatorship) and taking care of our child (guardianship) were separated between two families there is some accountability built in. I wonder if you would have someone stateside (maybe a fiduciary if you didn't have a family member or close friend?) as conservator while the guardians are overseas.

As part of our estate planning process we also got a couple of term life insurance policies that would help the surviving spouse take care of our child until they were old enough to take care of themselves. 

As a disclaimer, I'm not an attorney so I can't 100% vouch for what I said here; I know something about estate planning through my work in charitable gift planning and our own personal experience. So this definitely is meant to be informational and not advice, but hopefully it helps. 

RE: Estate planning now with kids ()

You are smart to get your estate plan set up sooner rather than later!  Yes, to my understanding (I am not a lawyer) anyone with dependents and a home should ideally have both a will and a living trust.  They are related but have somewhat different purposes.  The trust allows your spouse/heirs to manage your assets not only when you die, but also if you are incapacitated while still alive. You have a couple of different options for handling how your property will be treated if one spouse dies and the other eventually remarries and perhaps has other children or stepchildren, which is something you may want to think about sooner rather than later.  And if you and your spouse were to die at the same time, say in a car accident, while your children are still minors, then a will alone would not allow your chosen person access to everything they would need without first having to go through the probate court process -- which can take a very, very long time and be very expensive, and will be complicated in your case where the children's guardian is not in the US.  You can certainly name different people to be your children's custodial guardian vs their financial trustee, which might be helpful to you, but of course it depends on a lot of specific things.  You will definitely need a lawyer to guide you through this!  The total time it takes to get all of the documents drawn up the way you want them varies a lot depending on thing like how specialized your will and trust need to be (vs plugging a few names and other details into the right standard form), how quickly you are able to make decisions and to review the draft documents once you get them, and to be honest, just how busy the lawyer is!  Start to finish, I would expect it to take at least a couple months and a few thousand dollars.  I've seen it take much longer and cost much more in some cases.