Have You Protected Your Assets and Family?

Our lives changed drastically over the past several years. First, we got married in 2008. Then we had our first son in 2009, followed by our second son in 2011. Add to that we purchased a new home together for our growing family, and became landlords at the same time because we could not sell our previous home. So what happens if something would happen to either of us?

Lesson 1: Life Insurance

The first major step we took to securing each others future was getting life insurance policies. I will admit as much as I love finances, I knew very little about insurance. Actually I was raised to be afraid of insurance in a way. My father was always of the mind set of why waste money on insurance? We are the type that does not place claims all the time, especially if it is something we can easily cover out-of-pocket. Our opinion was always “why alert the insurance company of a claim if it will raise our rates?” In addition, if it costs under $1,000, or what ever dollar amount, to repair, why would you turn it in? So in a way we were always self insured (when it came to insurance coverage beyond auto and home).

After meeting my wife, I was introduced to her friends from college, who the husband happened to be a financial planner, and handled some assets of my wife’s through her employer. About the time we had our first son, we wanted to discuss possible life insurance benefits should something happen to either one of us. I was against term life insurance, for the most part, because I did not like to “rent” and throw my money away. We were introduced to some Universal life insurance policies that built cash value over time, in addition to being able to provide tax-free retirement income in the future. It was a win-win for both of us because we were not only providing life insurance coverage, but also future retirement income.

We probably should reevaluate our insurance needs now that we have a more expensive home; however, we purchased what we could afford coverage wise, and should be more than adequately covered should it ever be needed. In actuality, looking at our budget, we may need to scale back our contributions to start to make the numbers work.

Lesson 2: Will and Power of Attorney

The second most important document(s) that will be required to protect our assets and family is a Will and Power of Attorney. We were finally able to wrap up both of ours last week, and will look to create a Living Will, and possible other documents shortly.

The hardest part of our estate planning documents was determining who would receive custody of our children. When you really sit down and think about it, it is an incredible powerful moment to decide who will raise your children to your standards. My wife and I first sat down and discussed custody of our children on a date night back in March 2011.

During the decision making process, there are several things to consider.

1) Make a list of possible custodians of your children. This is harder than you would think. In our case, we each had a sibling in different stages of life, but there were few other options to consider.

We did not want to put either of our parents as custodians of our children, and you might want to consider these things also. My wife’s parents are recently retired while mine both will work for years to come. There are two main reasons we chose not to go with our parents though as custodians of our children.

a) Both of our parents raised two children and are either in or approaching retirement. We did not want to burden our families with supporting young children again. We want them to really be able to enjoy life without the possible need to raise kids.

b) As our parents age, we did not want to have to go back and revise our estate planning documents should our parents no longer be able to take care of our children should something happen.

Once we looked at our narrowed down list, we knew are siblings were the best choice to raise our children. In addition, in reality we know our parents would also play a tremendous role in our children’s lives, even with our siblings having formal custody.

2) Once the list is narrowed down, really think through the whole child raising process through the eyes of the future custodian.

In our situation, my sister is married, childless, and responsibly limited. Meaning, my sister and her husband do not want children of their own, pets, or even a yard. That is why they live in a fancy downtown condo with limited responsibilities other than themselves.

My wife’s brother is still in college. In addition, we know he will want to marry and possibly have kids someday. Quite the opposite scenario than my sister.

Therefore, who would be the best choice to raise our children?

While my brother-in-law is currently in school and unattached, it would be irresponsible of us to turn custody of our children over to him. He is just not in the right place of life right now, not to say he would not do a great job. Down the road, once his life becomes more balanced, we might look at changing custody into his name.

My sister absolutely adores our children, despite not wanting their own. However, they are the more logical solution right now. My wife and I sat down with my sister and her husband and explained our situation. We told them about how we want our children to be raised, and how their posh life style might have to be changed should something ever happen. Realistically, their multi-storied condo and poor school district might not be the best living quarters for two young boys and possible future siblings. The biggest thing we wanted to impress on them is that should they choose to be responsible for our children in the future, we did not want it to cause unnecessary consequences in their lives.

In other words, since they do not want kids, etc., I would not want my sister’s husband to regret my sister down the road for this decision. Therefore, we wanted them to really think about what it would be like raising two or more children and how their lives would need to change. We fully gave them the opportunity to turn down the offer should they choose. In addition, we did not want them to not know they were the custodians of our children ahead of time.

There lies another important point. Make sure you discuss with your beneficiaries any wishes prior to implementing them into a Will.

Besides making the toughest decision of who would be responsible for raising our children, we also expected certain things with that responsibility. There are certain morals and ways we wanted to raise our children. In addition, the most important thing to us was having both families have an equal share of time with the kids. Meaning, just because my sister would be responsible for raising our children, we wanted to make sure they were raised equally among the families, including holidays and events.

So with all of that, we finally wrapped up our Wills and Power of Attorney documents this week. Now we are protected should something ever happen.

Have you made those important decisions to protect your family?