While awaiting the recent birth of my first granddaughter, I spent a lot of time thinking about the best possible gift I could give her. Ultimately, I decided that the ideal present for my grandchild was to give her parents–my daughter and her husband–a professionally drafted estate plan.
New parents can be overwhelmed with the incredible responsibilities associated with caring for a newborn, so they aren’t always thinking about the importance of drafting wills and other estate-planning documents. According to a 2020 Caring.com survey, only 16.4% of Americans between the ages of 18 and 34 and 27.2% of Americans between the ages of 35 and 54 have estate-planning documents. Dying without a will can lead to serious financial problems and burden surviving family members with avoidable stress. For example, if new parents don’t appoint a guardian in a legally binding will, a judge could ultimately decide who will raise their children in the event that the parents pass away before the children reach the age of majority.
In addition, given the financial demands associated with raising a child, new parents can be short on cash and tend to postpone spending money on expenses not seen as necessary and immediate. Investment-savvy grandparents should consider gifting an estate plan in order to make sure that their grandchildren are adequately protected in the event of the premature death of their parents.
High net-worth investors already understand the importance of strategy, planning and adhering to a long-term perspective. Those same principles apply when it comes to gifting an estate plan because you are, in essence, taking steps to prepare for various future contingencies and to ensure that your grandchild will be protected, both financially and personally, in the event of an unforeseen emergency affecting your adult child and his or her spouse.
It’s important to work with an experienced estate-planning attorney who can ask tough questions and describe the challenging circumstances when parents of minor children die. Based on the parents’ responses, the attorney can draft wills, durable-power-of-attorney and health-care power-of-attorney documents for your adult children and their spouses that will attempt to address the expected needs of supporting a child without parents. The child’s parents should then determine who should serve as the guardian or conservator, naming primary and secondary appointees in each category.
In some states, the roles of the guardian and the conservator are clearly delineated: A guardian is responsible for overseeing life needs and making decisions about housing, education, religion, health care and other important issues, while a conservator is charged with managing money and making financial decisions. In other states, guardianship and conservatorship are inextricably combined as one responsibility. A legal professional can help you work within the laws for your particular state.
The birth of a grandchild is one of life’s greatest joys and biggest rewards. It’s also a landmark occasion that ensures the continuity of your family and offers the opportunity to transfer wealth to the next generation. Think about gifting an estate plan to your children and their spouses as a valuable investment in your grandchild’s future. And, in the end, taking the financial pressure off your children, while making sure your grandchildren are adequately protected, is a win/win situation for everyone.
This article was originally published to subscribers of The Wall Street Journal, found HERE.