It is important to create an estate plan regardless of your income. This is because estate planning is about more than passing your assets to future generations. For instance, a will could stipulate who serves as a guardian for your minor child if you were to pass unexpectedly. Furthermore, putting assets into a trust ensures that someone is available to manage them in the event that you become incapacitated.
Minors cannot inherit assets themselves
Creating a trust ensures that a child receives their inheritance if you were to die before they reach the age of majority. It can be overseen by a friend or family member who you trust keep an eye on cash, a home or other items that your child will eventually take ownership of. It can also help to preserve your child’s inheritance in the event that you die after getting remarried.
Certain assets can be passed outside of your estate
Assets such as a 401(k), brokerage account or life insurance policy will generally pass per the terms of a beneficiary designation. As these assets are held outside of your estate, they can be transferred to a child, grandchild or other beneficiary without the need for probate.
Depending on the structure of your estate plan, it may be possible for a car, house or other property to be handed down without spending time in court. In addition to saving time and money, avoiding probate minimizes the risk of legal challenges that might result in strained relationships between family members.
Ideally, you will create an estate plan the day that you become a legal adult. However, it is critical to execute a will, trust and other estate planning documents the day that your first child is born. An attorney may be able to help you prepare these documents or review any that already exist to ensure that they adhere to state law.