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Estate Planning with Minor Children

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estate planning with minor children, Illinois estate planning lawyer, estate planning attorneyWhen many people think of estate planning, they picture it as being something that senior citizens do as a way to ensure their wishes are carried out regarding how their assets should be divided among their adult children and other beneficiaries.

But it's never too early to plan. Legal experts even recommend estate planning with minor children. Sadly, tragic accidents and illnesses do occur to young adults, so it's in everyone's best interest to make sure that young children are taken care of in the event of a parent's death. There are four different accounts that financial experts say every parent should have set up for their children. Not only do these accounts provide for their future, but they also can teach children how to be financially responsible, which is a lesson that will help them as they become adults.

The first account is a basic savings account. Children can deposit gift money they receive and allowance money. One important item to keep in mind about savings accounts is how they affect college financial aid. Currently, a child can have up to $3,000 in a bank account that bears their name without those funds effecting how much aid for which they are eligible.

If you are looking to invest in stocks and bonds for your child, you can open a Uniform Gift to Minors Act (UGMA) or a Uniform Transfer to Minors Act (UTMA) account. There are many tax advantages to these accounts. According to NASDAQ, the first $1,000 in interest earned every year isn't taxed at all. The next $1,000 is taxed at the child's income tax rate of approximately 5 percent. Any interest beyond $2,000 that is earned is taxed at the parent's income tax rate. Once the child reaches the age of consent, either 18 or 21 depending on the state you live in, they have full control. Setting up a 529 Plan for college is similar to a 401K for retirement. Funds for these accounts come from pre-tax money and if the funds are used for college, then the interest earned on the account is never taxed. If the funds end up not being used for education, then parents must pay the interest plus a ten percent penalty. The fourth account that every parent should have is a term life insurance policy, which helps provide the finances to take care of a child should something happen to their parent. Term policies are fairly inexpensive as well. There are many factors to consider when planning your estate. And it's never too early to start making those plans. Contact an experienced Wheaton estate planning attorney today to help ensure your family's security should something happen to you.
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