Young families often think estate planning is for older, wealthier people—but nothing could be further from the truth. If you have children, you need estate planning. Without it, your family's security rests on uncertain legal foundations. This guide helps young families understand what they need and how to get it.
Table of contents
Why young families need estate planning
Essential documents for young families
Naming guardians for children
Providing for children financially
Protecting your partner
Common mistakes to avoid
Reviewing and updating your plan
Getting started
Why young families need estate planning
As a parent, your children's wellbeing is your primary concern. Estate planning ensures they're protected if something happens to you. Without appropriate documents, the courts decide who raises your children—and that might not be who you would choose.
Even if you don't have significant assets now, you will—eventually. Your future earnings, the home you build equity in, and the savings you accumulate all need to be managed for your children's benefit. Proper planning ensures this happens appropriately.
Beyond children, estate planning protects your partner. If you're married or common-law, your partner faces complex legal situations without proper planning. Without documents, they might face hurdles accessing assets or making decisions during difficult times.
Essential documents for young families
Will
A will is the cornerstone of family estate planning. It specifies who receives your assets and, crucially, who cares for your children. Without a will, provincial law determines these matters—likely not what you would choose.
Your will should:
- Name guardians for your minor children
- Specify how assets are held for children's benefit
- Name an executor to manage your estate
- Make specific bequests as appropriate
- Address any business interests if applicable
Since your situation will change as your family grows, your will should be easily updatable. Avoid overly complex arrangements that will become outdated.
Power of attorney
Powers of attorney protect you if you become incapacitated. Two types matter for young families:
Power of attorney for property: Authorizes someone to manage your financial affairs if you can't. This is crucial if you're the primary income earner and become unable to work.
Power of attorney for personal care: Authorizes someone to make healthcare decisions if you can't. This ensures someone can make medical decisions for you if you're incapacitated.
Without these documents, your partner might need to seek court authority to act on your behalf—a time-consuming process during already difficult times.
Beneficiary designations
Review beneficiary designations on:
- RRSPs and RRIFs
- TFSAs
- Life insurance
- Pension plans
These designations determine who receives assets outside your will. Ensure they align with your overall plan—marrying someone new, for instance, shouldn't leave your ex-spouse as beneficiary on old accounts.
Naming guardians for children
Perhaps the most important decision for parents is who would care for your children if both parents die. This is a guardian designation in your will.
Choosing guardians
Consider people who:
- Share your values and parenting philosophy
- Have established relationships with your children
- Are physically and emotionally capable of raising children
- Have stable home environments
- Are willing to take on this responsibility
Discuss with potential guardians before naming them in your will. Naming someone who doesn't know or hasn't agreed creates problems.
Single vs. joint guardianship
You might name one person to be the sole guardian, or two people jointly. Joint guardianship provides checks and balances but can create disagreements. Consider what works best for your family.
Alternate guardians
Name alternate guardians in case your first choice can't serve. This ensures someone is available if your primary guardian becomes unavailable.
Guardian compensation
While you can't require guardians to use their own money, you can provide for financial support. Your estate can provide for children's care, reducing the financial burden on guardians.
Non-parent guardians
You can name non-parents as guardians—this is often appropriate. Grandparents, close family friends, or others might be better suited than siblings or others. Choose whoever would be best for your children.
Providing for children financially
Life insurance
Life insurance provides financial protection for your family. If you die, life insurance proceeds can:
- Replace your income for your partner
- Provide for children's expenses
- Ensure children's needs are met
- Cover debt (mortgage, car loans)
- Fund education
Determine how much coverage you need—typically several years of income plus debts, plus education costs. Term insurance is usually appropriate for young families—it provides significant coverage at reasonable cost.
Creating trusts for children
Your will can create trusts for children's benefit. Rather than leaving assets outright to children (who might be too young to manage them), assets can be held in trust until they're older.
Trusts can specify:
- At what age children can access funds (typically 18, 25, or 30)
- What funds can be used for (education, maintenance, etc.)
- Who manages the trust (trustee)
- Conditions on distributions
This ensures children receive benefit from your assets without being overwhelmed by money they can't manage.
Registered Education Savings Plans (RESPs)
While not technically estate planning, RESPs provide education savings that can continue after your death. Name a successor subscriber who can continue contributions if you die.
Protecting your partner
Your partner needs protection too—especially if you're the primary earner or have significant assets.
Ensure adequate life insurance
Your partner should have enough life insurance to maintain family lifestyle if you die. Calculate based on debt, living expenses, and children's needs.
Review beneficiary designations
Your partner should be named as beneficiary on accounts where appropriate. Ensure designations align with your overall plan.
Create appropriate documents
Your partner needs powers of attorney so they can act for you if you're incapacitated. Without these, they might need court authority to handle finances or make decisions.
Consider what happens to your partner
If your partner is your children's other parent, their wellbeing directly affects your children. Ensuring your partner is protected helps protect your children indirectly.
Common mistakes to avoid
Not having any documents
The biggest mistake is not having any estate planning documents. Every parent needs at least basic documents—wills and powers of attorney. The consequences of going without can be severe.
Only having documents for one partner
Both parents need documents. If only one partner has a will and powers of attorney, the other might be unable to act when needed. Both partners need complete planning.
Outdated documents
Marrying, having children, buying homes, or other life changes might require updating documents. Review your plan when major events occur—and at minimum annually.
Naming unsuitable guardians
Don't name guardians just because they seem like the "obvious" choice. Carefully evaluate whether they'll actually be good parents for your children. Your children are worth careful consideration.
Not funding life insurance
Buying life insurance but letting it lapse defeats the purpose. Maintain your coverage as long as your family needs protection.
Not discussing with your partner
Estate planning should involve both partners. Discuss decisions about guardians, how assets will be managed, and your overall approach. Agreement prevents future conflicts.
Reviewing and updating your plan
When to review
Review your estate plan when:
- You have or adopt children
- Children reach milestones (start school, become adults)
- You marry, divorce, or have significant relationship changes
- You have significant asset changes
- Someone in your plan dies or becomes unable to serve
- Tax laws change significantly
- At minimum every three years
What to review
When reviewing, check:
- Are guardians still appropriate?
- Are beneficiary designations current?
- Is life insurance coverage adequate?
- Are your assets properly titled?
- Do your documents still reflect your wishes?
- Is your executor still appropriate?
Updating documents
When you need changes, update your documents. Simple changes might be done through codicils; more significant changes require new documents. Work with a lawyer to ensure updates are properly made.
Getting started
Start with what's essential:
- Create or update wills that name guardians for your children
- Get powers of attorney for both partners
- Review life insurance and ensure adequate coverage
- Check beneficiary designations to ensure they're current
- Create an inventory of your assets and important documents
As your family grows and your assets increase, expand your plan. Add trusts, more complex arrangements, and additional protection.
Young families need estate planning now, not later. The documents are straightforward, costs are manageable, and the protection provided is essential. Don't delay—protect your family today.