A common misconception among Houston families is that you have to be wealthy in order to provide something for your children when you die. As discussed in a recent article on the Washington Posts’ website, this simply isn’t the case. There are a number of tools you can use to leave assets to your children and other heirs, and having an estate plan in place is a critical part of ensuring that those assets are disposed of according to your wishes. Here are some things you can do to make sure your estate plan is structured properly:
Make sure you have a will or trust. Every good estate plan needs a document that dictates who will receive a decedent’s assets, how the assets will be received, and how the assets will be managed, if necessary. For instance, if you have children, your will or trust can make sure your assets are placed in trust for your children so that the assets are protected from the child’s creditors and in the event of a divorce later in his or her life. If you have children who are minors, your will can name who you would like to serve as guardian of your children if you die.
Buy life insurance. If you are in relatively good health with no serious previous health issues, life insurance can be a relatively inexpensive way to provide financial support for your spouse and children if you die. If you are the sole income earner in the family, it is very important to ensure that you have enough life insurance to care for your family if you die. Advice varies on how much life insurance is enough, but you need to account for things such as mortgages, education for your children, medical care and living expenses for your spouse’s lifetime and for your children until they reach adulthood.
529 Plans. This type of plan can be a great option for saving for your children’s or grandchildren’s college education, because once the money is deposited into the account, it grows tax-free and is never subject to income tax, provided that the money is used to pay for allowable educational purposes. You should speak to your financial adviser to see if a 529 plan is a good fit for your needs. You can read more about 529 plans here.
Reference: Washington Post (November 3, 2014) “How to pass money on to your children“