Experienced parents smile at memories of how tiny babies, especially first-borns, completely turn households upside down. Welcoming a new baby means that parent’s lives change, and in addition to diapers, a cribs and onesies, parents need an estate plan, as reported in the article “5 Legacy Planning Basics for New Parents” from ThinkAdvisor.
Take time to talk through high-priority items. Create a staggered checklist—starting with today—and set attainable dates to complete the rest of the tasks. Here are five things to put on that list:
Will. This gives the probate court your instructions on who will care for your children, if something happens to both you and your spouse. A will also should name a guardian to be responsible for the children. Parents also should think about how they want to share their personal belongings and financial assets. Without a will, the state decides what goes to whom. Lastly, a will must name an executor.
Beneficiaries. Review your beneficiary designations when you create your will, because you don’t want your will and designations (on life insurance policies and investments) telling two different stories. If there’s an issue, the beneficiary designation overrides the will. All accounts with a beneficiary listed automatically avoid probate court.
Trust. Created by an experienced estate planning attorney, a trust has some nice benefits, particularly if you have young children. Everything in a trust is shielded from probate court, including property. This avoids court fees and hassle. A trust also provides some flexibility and customization to your plan. You can instruct that your children get a sum of money at 18, 25 or 30, and you can say that the money is for school, among other conditions. The trustee will distribute funds, according to your instructions.
Power of Attorney and Health Care Proxy. These are two separate documents, but they’re both used in the event of incapacitation. Their power of attorney and health care proxy designees can make important financial and medical decisions when you’re incapable of doing so.
Life Insurance. Usually people don’t purchase life insurance until they have a child or purchase a house with their spouse. If you already have life insurance, that’s a start. Consider the cost of raising a child to adulthood, including college costs. Do you have enough life insurance in place? Every time you welcome a new family member, your life insurance needs increase. Make sure that your life insurance coverage is enough to protect your family.
Reference: ThinkAdvisor (March 7, 2019) “5 Legacy Planning Basics for New Parents”