We’re all familiar with the story of Cinderella. Her mother died when she was young, and she was raised by her loving father. Eventually, he remarries in order to give his beloved Cinderella a stepmother and stepsisters.
Then Cinderella’s father dies and leaves everything to the stepmother, who uses the inherited riches for herself and her two daughters. The stepmother and sisters are cruel to Cinderella, taunting her and and forcing her to do chores all days long. (And for some reason, she can talk to mice and birds.)
Cinderella’s dad did a really poor job of something that many other people neglect as well — estate planning when you have a family who depends on you.
What is estate planning, exactly?
In simple terms, estate planning is the process of making sure that your wishes are carried out and that your family is taken care of if something should happen to you.
What should Cinderella’s father have done differently?
First of all, he should have picked a more suitable guardian for Cinderella. A guardian is the person asked to take over and raise your child or children if you die.
This could be a friend, grandparent, relative, or anyone that you think would do an excellent job of raising your little munchkin and would be happy to accept that responsibility. Once you’ve picked a guardian, don’t forget to:
- Ask them if they would accept this responsibility
- Write it up in your will or trust
The guardian will care for and raise your child, but if you want to set up someone else to manage the money, you can set up a trust and appoint a trustee. A trustee is the person (or entity) that handles the money, decides how to invest it, and doles it out. You can specify guidelines for money management in your will or trust.
If Cinderella’s father had appointed a trustee for his money, Cinderella would have received money for health, education, maintenance and support, and she wouldn’t have been forced to dress in rags. When she grew old enough, Cinderella’s dad’s trust could have specified that Cinderella be given money to be able to buy her own home, and she could have led a nice life with or without Prince Charming.
Once you’ve decided who is going to raise your child if you die and who will manage the money, you should make sure that you don’t leave your child and his or her guardian penniless. Do you have life insurance in place? If so, make sure that the beneficiary designation is set up correctly. Do you have a 401(k) through your job? Better check the beneficiary designation there, too!
Your will or trust should specify where other assets, like property or bank accounts, will go. If you don’t have enough life insurance or assets to provide for your child through his or her adult years, start shopping around!
Without proper estate-planning documents, your state’s system will pick someone to raise your children and handle your assets, and that is a risky proposition!
If you have children and don’t have a will, you are taking a huge gamble.
Steps you should take as soon as possible
- Decide who you want to designate as your child’s guardian.
- Ask the potential guardian if he or she will accept that responsibility.
- Decide if the guardian is also the best person to handle your finances. If not, decide who will manage the money.
- Ask the potential trustee if he or she will accept that responsibility.
- Go to an attorney (preferably a board-certified estate planning attorney) and draft up the legal documents that will specify the above-mentioned decisions in writing.
- Relax, knowing that you were responsible enough to put these essential measures in place!
- Revisit every few years to make sure your initial decisions are still valid.
Fortunately, Cinderella ended up happy with Prince Charming — but her life would have been a lot easier had her father adequately prepared plans for after his death. Learn from his mistakes and get your estate planning in order!