Here’s to the Dads, One and All


Here’s to the Dads, One and All

Last week, as a tribute to all Dad’s for Father’s Day, Tim spoke about the important role that dads play in family life. Many dads provide for their families financially. Being a good dad includes teaching their children good morals and values, being a support for their family, and attending sports matches and concerts. What some fathers don’t realise, is that doing estate planning is important too.

A Father’s Role

Tim was contemplating how the things he’s able to do for his kids now, would get done if he is not around. One aspect of being a good parent, is planning for any eventuality. Regardless of whether you are alive or have passed away, you have raised your children to be good people. Whether your kids are 47 years old or 60 years old, as a father, you also need to do good estate planning. You need to be able to provide financial stability for your family if you were to pass away. This would allow for your family to continue having the lifestyle they’ve grown accustomed to. There are other aspects too, and it’s not about only putting the check on the table.

Have You Got Adequate Life Insurance?

Many people think that all they need to do is answer the question of who gets their stuff when they pass away. They believe that having life insurance to replace their income, is all the family needs. Unfortunately, most parents of young children are under insured. Tim is not lisenced to give insurance advice, but he urges you to consider what you earn and what money your family needs every year. An average life insurance policy is worth three times the value of your annual salary. If you pass away, that money will only last for three years. It is therefore wise to consult with a professional and get adequate life insurance. If it means purchasing a less expensive vehicle or making other sacrifices, it is worth doing.

It’s Not Just About Money

It is important to know that estate planning is not only about money. If your family is involved in a car accident, and only you pass away, your children will live with their mother and guardian. However, you need to plan for what would happen if both you and your wife pass away simultaneously. Your children would likely be left in the care of a guardian. This guardian is named in your Will and will step in to take care of your children. The guardian will hopefully uphold the values and morals taught to the kids. They will also make important decisions regarding the care of the children.

If You Only Have a Will…

If you and your wife both pass away in an accident, you don’t want your children to be on their own when the police car arrives with flashing blue lights. You also don’t want for a social worker to take them away. By having a trust in place, there will be a family member or friend who is with your children to comfort them when they get the news. A family member or friend will also take care of your children. In the case of a Will, it may happen that a guardian will only step in once the parents have passed away.

If there is no trust, the money will go through the Uniform Transfer to Minors Act. This means your children may get their money at the age of 18. If a child receives money from an insurance policy on their 18th birthday, they may not yet be mature and responsible enough to manage the money wisely. We often suggest that kids receive money when they are 30 or older, and this is why using a trust is the answer.

A Trust is the Answer

If you have a Will with an underage trust built into it, and you pass away, the life insurance money does not go to the kids, but to a trust for the benefit of the kids. The money is subject to the terms of the trust. The Trustee manages the Trust until your children reach the age of 25 or 30. This will be someone with morals and values consistent with yours. They may be a family member, with a pen to the chequebook, until your children are 30.

The trustee can use the money for education or health care, for your children. They will also maintain a decent standard of living for them, and they will help and be involved with your kids.  It is important to remember that guardianship ends at the age of 18. However, the Trust, which is managed by the Trustee, continues to protect the money until your child is older.

Protecting Money for Your Kids

I have clients with kids in their 30s, and some are concerned about what would happen if their child goes through a divorce. We often advise them to just leave the money in the trust. You don’t need to do distributions on the kids’ 30th birthday. Your child can become their own trustee so they can be in control of the money. They can protect the money from things like divorce and creditors.

It’s common for people to want to avoid probate, which is the administration of a will when you pass away. We prefer doing trust based planning, because a trust is administered around the lawyer’s conference table. A Will goes through probate in the courthouse, and is costly and takes time. There are many reasons to avoid probate which I have outlined in previous blog articles on our website which you can read here.

When estate planning is done properly, it answers more than just the question of who gets my stuff when I pass away. As a father you want to leave a legacy and estate planning is part of that legacy.