As a business litigator, I defend companies against lawsuits. I also draft advantageous documents in an effort to help companies avoid certain pitfalls. In my line of work, being prepared for the “worst” scenario is a must.
The same rings true for any parent. Although no one can foresee everything that could possibly happen in the future, it is vital that parents take the proper steps to protect their children should the worst occur. In the event of death, incapacitation, etc., there are four legal documents that every parent should have:
A. A Will. The key purpose of a “last will and testament” is to express your wishes as to how your property (both real and personal) will be distributed and who will inherit it at your death. Morbid, yes, but necessary. It allows you to thoughtfully designate a person to care for your child(ren), i.e. appoint a guardian. An important tip to remember: if you intend for your children to be the beneficiaries of your life insurance policy, a will cannot (in most cases) override the policy, so you must make sure that the policy designates your children as beneficiaries. At the end of the day, dying without a will makes things difficult for everyone, puts the state in charge of distributing your property, and can leave your children in limbo in the toughest time of their lives. A will ensures that all of your wishes for your children are carried out the way you intend.
B. A Trust. A trust can be created to manage and protect the assets of children. A person of the parents’ choosing will manage the trust account to benefit the kids. A trust can be set up to be distributed while children are young (to help with expenditures) and it can also be set up to prevent distribution of funds until minors reach adulthood. This prevents children from inheriting large sums of money at a young age. Parents may also allocate the assets in a trust according to the needs of each specific child. For instance, if you have a child with special needs, then they may receive a larger allotment of money to cover the expenses associated with those needs. Here, it is smart to consult an estate planner who can offer various types of trusts to accomplish specific goals.
C. Power of Attorney (POA) for financial and health care purposes. A POA document allows a parent (the principal) to name someone to act for them (an agent). The designated agent should be someone that the parent trusts. Should a parent become temporarily or permanently incapacitated unexpectedly, this ensures that the designated individual can make desired financial and healthcare decisions for the parent. In other words, a POA allows a parent to select someone close to them, to make decisions on their behalf and this power only kicks in if the parent is in such a condition that they are unable to communicate or otherwise make the decisions on their own. Please note that a healthcare POA is separate and apart from a financial POA. It must be clear and conspicuous by stating that the document is intended for healthcare purposes.
D. Advance Directive/Living Will. The health care POA is usually accompanied by an advance directive. This document addresses “end of life” issues. In general, the Healthcare POA gives an agent power to make healthcare decisions. However, an advance directive is an added layer that specifically states how a person will be treated if they are not going to survive an illness or accident. If an advance directive is not in place, then parents put loved ones in tough positions to make decisions such as whether to implement life support options.
These are four important documents to get started. Remember that each state has specific laws, which govern these legal mechanisms and in most cases an attorney should be consulted in drafting these documents to suit specific needs. I’m not a parent, yet, but I know that preparation is usually more than half the battle!
Written By Ariel Harris Roberson – Business Litigation Attorney in Charlotte, North Carolina