Guardians and Finances for Children
There are two important parts to planning for children or any other dependents:
- Naming guardians and financial fiduciaries - Without guardians, the state of Arizona will appoint guardians (and those guardians may not have made your shortlist). A last will and testament names guardians. A trust can hold assets and the trust's fiduciary can provide money for health, education, maintenance and support needs.
- Creating money - The burden should not be on kindergarten, grade or high school children to support themselves nor for guardians to use their savings or work more hours to support your children. Term life insurance's primary purpose is creating large sums of money inexpensively.
The average cost to raise a child is between $250,000 and $400,000. Term life insurance for these amounts for healthy parents is often less than $25/month. Four Peaks Planning, Inc. does not sell life insurance but we do recommend talking to local insurance advisor to ensure you have adequate coverage.
Nominating guardians for minor children may be the most difficult decision in your estate plan. Who you pick will impact not only your children but also the lives of your guardians.
While you and your children may feel an affinity for a particular adult(s), it is important to review a number of factors to ensure a harmonious living environment:
- Guardians with similar-age children. With other children around, your children's minds are likely to be preoccupied by children their age rather than the unfortunate circumstances.
- You may be asked to be their children's guardians. If their kids are raised with similar values, the transition either way should be easier for both the children and the guardians.
- Life-style changes for your potential guardian. As much as you may love and respect a relative, be mindful if he/she is about to become an empty-nester or does not have children living with them. It is a large lifestyle adjustment compared to guardians who already have children.
- Value systems, morals and religious beliefs. All or none of those may be factors in determining who to approach about being your children's guardians. Guardians who are not part of your family may not spend all holidays with your extended family since they have their own extended family.
- How many guardians to list. Many estate plans list primary and backup guardians. Guardians are appointed in your Last Will and Testament.
- Talking with children. After you have come to a decision, talking to your children is not a bad thing. It gives them a chance to express their feelings and worries. It also reassures them you will always be caring for them - even if you're gone.
- Guardians are not paid
- Guardians are not obligated to serve
- Guardians must be adults
- Your choice is only a recommendation to the court but state laws give it high priority
Life Insurance for Financial Security
Few people get excited about spending money on life insurance. Though Four Peaks Planning, Inc. does not sell life insurance, we cannot stress enough its importance in estate planning when dependents are part of the equation.
Once again, the average cost to raise a child is $250,000 to $400,000 and most families have more than one child. A good rule is having life insurance equal to 10x the salary of each earning parent.
Term life insurance is the least expensive way to prepare an estate for children unable to provide for themselves. You select the term based on how long you want coverage: 10, 15, 20, 25 or 30 years (the longer the term, the more expensive).
If the goal is providing for kids and you will have an empty nest in 15 years, select a 15 year term. If married and each plans to retire in 10 years, a 10 year term may fulfill your needs.
When the term ends, the coverage ends. You can stop the coverage at any time prior by ceasing to pay your premiums.
Universal life insurance and whole life insurance last your entire lifetime and grow a cash value tax-free but often cost three to four times as much. Term life insurance is more commonly used for young families due to its lower cost.
Four Peaks Planning, Inc. does not sell life insurance though on our Existing Clients page we have several local life insurance advisors who can provide free quotes.
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