A new baby can bring so much joy to parents and their families. In this season of new life, a million things are probably racing through your mind every second. Between baby showers, putting the finishing touches on the nursery, and stocking up on diapers and supplies, the days of a new parent are often busy— perhaps a touch chaotic.
When starting your new family, estate planning is probably the last thing on your mind. However, it’s important to realize that this process not only prepares you for your family’s current needs but future needs as well.
Estate planning is vitally important for your child’s future, should anything happen to you or your spouse. Remember, estate planning is a complex process and you should consult your attorney and other financial professionals before making any updates to your plan.
Here are our four top tips to help organize your estate plan as a new parent.
Estate Planning #1: Adjust your will
Before adjusting your will, the first step is to actually have a will put in place. Your will is the cornerstone of your estate plan and outlines your wishes for your assets— among other things.
When you update your will, be sure to include two main areas:
As a new parent, you will want to establish a guardian for your children if you were no longer able to take care of them. Selecting the right guardian, while grim, is an important task. This person would assume the responsibility to raise and care for your children.
It’s important to choose someone who will not only respect your wishes and values but also be able to give your children the life they want and deserve. Before appointing a guardian, sit down and have an open and honest conversation with that person, as this would be a massive responsibility.
Another important person in your child’s life is the trustee, which would be the person responsible for the financial requirements like taxes and managing any inherited funds. A trustee would pay bills for your child, file any taxes due, and may or may not give any remaining funds to your child over time.
A guardian and trustee can be the same person, but they don’t have to be. If you do wish for them to be the same person, you can add another person to the will as a co-trustee. A co-trustee can help oversee financial matters alongside the trustee.
While no other person would be a better parent to your child than you, it’s important to be prepared should an unprecedented event arise. When you have a will put in place, you are in control, not the court system.
Estate Planning #2: Revisit your beneficiaries
Beneficiaries are the people who inherit an account, policy, or asset from you. You have a beneficiary for insurance, investment accounts, retirement accounts (401k, IRA, ect.), bank accounts, real estate— essentially if you have an account, you have a beneficiary for it.
You may want to name your child as a new beneficiary on your accounts. While considering that route, we strongly recommend that any beneficiary on an account be 18 years or older. Minors cannot control property, so in the event that they inherit the account, the court may appoint an attorney or another adult to oversee the account until the minor is 18.
It’s important to note that a beneficiary designation is more legally binding than a will. Say, for example, you named a friend as a beneficiary on your bank savings account but in your will, it was left for your child. The official beneficiary, your friend, would be legally owed that money, not your child.
Trusts can be a good option for children who are minors as trusts provide control over your assets in the event of your death. Your certified financial advisor will provide you with multiple options based on your goals and wants for your children.
While it may not be top of mind, it’s good practice to review your beneficiaries periodically to ensure everything is up to date. Again, the more prepared you are now, the more control you have over the future.
Estate Planning #3: Check on your insurance
Remember that life insurance policy you’ve been putting off? Now is the time to get serious about it. A life insurance policy is another way to ensure that your family can take care of expenses in the event that something should happen to you or your spouse.
The amount of coverage and type of policy you should have is dependent on:
- The size of your family
- Your net worth
- Any debts or loans in your name
- Future expenses for your family
Generally, your life insurance policy should be 20 times your annual income, but that’s not always the case. A certified financial planner can help you choose the policy that will best fit you and your family’s needs.
Estate Planning #4: Ensure you have a power of attorney, or two
A power of attorney (POA) is someone who has the legal ability to make decisions on your behalf. For your estate planning needs, you will need to have two different POAs: a health care/medical POA and a financial POA.
A medical POA/directive makes any medical decisions for you if you become incapacitated. It’s important that you have your healthcare wants clearly outlined in your will so your medical POA can carry them out as you wish. For example, whether you would or would not want to be on life support and for how long is something to put in your will.
A financial POA handles any financial matters if you become unable to. This person would have access to your accounts and handle payments for debts, taxes, bills, and so on. A financial POA can be a partner, spouse, or anyone that you trust.
Estate Planning #5: Rally together with your team of professionals
Estate planning is a complex process— one that requires a strong, cohesive professional team to get right. While it may seem like an unpleasant topic, estate planning will help safeguard not only your financial security but emotional wellbeing.
While your certified financial planner will be able to help you create a plan that’s unique to your needs, you’ll also need an estate planning attorney who you trust and can help you execute the documents in your plan.
Here at Platt Wealth Management, we are passionate about helping you achieve your goals and we do that by putting your needs ahead of our own. Prepare for the best possible future and give us a call at (619) 255-9554 or email us here for a complimentary review.