Of all the New Year’s resolutions made each year, self-improvement accounts for 47 percent and money issues account for 34 percent. The tradition of the New Year’s resolutions goes all the way back to 153 B.C. and “January” is derived from the ancient Roman mythical king of beginnings and traditions, Janus.
In keeping with tradition, as a parent protecting your children likely is at the top of your list. A resolution to do all you can to protect your children from uncertainty ties in both self-improvement and money issues.
Here’s how to make the most of your opportunity to protect your kids with a New Year’s resolution for 2013:
Buy term life insurance to provide for your kids if you die young. Term life insurance is relatively inexpensive for a young parent, and could be exactly what your family needs if you happen to pass away early in life. Dave Ramsey recommends that a parent purchase twenty-year level term insurance equal to about ten times your income.
Life insurance proceeds ideally will leave enough money behind for the surviving parent or a guardian to pay for your children’s extracurricular activities, schooling, uniforms, camp, clothes, doctor and dentist bills, and anything else that comes up.
Create an Irrevocable Life Insurance Trust to ensure the death benefit isn’t cut in half by estate taxes. Once you have life insurance in place, consider a specialized Irrevocable Life Insurance Trust (often called an “ILIT”) to hold onto the policy. This is a special type of trust that is easy to maintain with the proper instructions. With only ten minutes of your time each year crossing the T’s and dotting the I’s, you eliminate a 55% tax on the death benefits of the life insurance proceeds for your family. An ILIT is one piece of the larger puzzle of a solid estate plan to protect your family.
Update your estate plan, or get an estate plan in place if you don’t have one yet. As a parent, ensure you have the legal documents in place to know what happens to your children if something happens to you. To make sure your children never end up in the hands of someone you would never choose, have an estate planning attorney assist you with short-term and long-term legal guardianship documents.
If you are disabled or incapacitated, make sure your spouse or partner is equipped to make financial and medical decisions for you. A spouse is not automatically entitled to step into your shoes legally if something happens to you; only a power of attorney can make the transition seamless for a spouse or partner.
And avoid the hassle and expense of probate with the proper will and trust for your circumstances. Don’t trust the myth that having a will avoid probate–it doesn’t. Your estate plan should be a comprehensive plan that addresses a variety of contingencies, including the hassle that probate would be for your family and how it can be avoided.
Put an estate planning attorney in charge of staying on top of necessary updates to your estate plan and how your assets are titled. Remember that your estate plan consists of living documents. The truth of the matter is legal documents are not “do it and forget it.” Your guardianship documents, powers of attorney, will, trust, and business documents need to be reviewed and updated throughout your life. If you don’t update your estate plan as your circumstances change, the your loved ones may find out–too late–that the documents are out of date or the assets aren’t titled properly anyway. Then, the plan fails.
Make it a New Year’s resolution to find an estate planning attorney who will keep everything up to date for you, review your documents regularly, and offer a program to provide you with continuing guidance on an ongoing basis without hourly fees.