When you’ve just welcomed your first child into the world (or perhaps a few years ago!) the last thing you want to think about is what might happen to your child and to your assets if you were to pass away. It’s difficult to consider, but it is vital for the safety and security of your little ones. Throughout our lives, the pieces we need to consider in regards to estate planning change but it’s important if you don’t have a plan in place yet, to create one as soon as after you have a child as you can.
First and foremost, both parents should have a formal will drawn up that specifies not only the beneficiaries of any assets they have but for those with young children, this is the time to determine who will take legal responsibility for them in the event that you (and your spouse, if you have a spouse) pass away. It is vital to name a guardian and trustee for any children under 18 years old — if not, the court will have to do so for you. While the courts generally will select a family member if a guardian is not named by the parents and it’s vitally important to choose someone you trust, as they will have custody of your children until the children are of age. You can also create a living will that can dictate things like medical care directives and other legal decisions that would take effect if you were incapacitated or otherwise unable to make those decisions but were still living.
If you don’t already have a life insurance policy, the birth of a child is an excellent time to evaluate the type and size of life insurance you might need to assist your family and children in the event of your death. If one parent dies, life insurance can help support the surviving parent, as well as the child. As we all know, raising children can be expensive and thus it is important consider the financial implications of what the loss of family income would cause, especially if a surviving parent needs to alter their employment to care for the child. There are policies that fit all types of budgets and circumstances. For most families, term life insurance makes sense — premiums tend to be lower, but the coverage can be designed to expire once your children are adults. However, for families with children with special needs or other circumstances, a whole life policy is often recommended in order to provide insurance protection for lifelong care.
A Power of Attorney is designed to permit an individual the ability to make decisions on your behalf if you are incapacitated. Like a living will, you can create a healthcare power of attorney that would give a trusted person the ability to make healthcare decisions on your behalf — and, if you have a living will, these decisions would guided by those directives. These types of power of attorney can be helpful in the event of an accident or incident that leaves one or both parents unable to make the choices for themselves, giving physicians the information they need to administer care.
A living trust is also an excellent opportunity to name your children as beneficiaries of your assets while you are still alive, allowing for different taxation statuses to benefit your heirs as well as giving them some access to the assets. Trusts can be beneficial because they tend to help to avoid hefty estate and inheritance taxes, and they can specify inheritance arrangements for beneficiaries. Further, in some cases trusts protect people’s assets from being seized by creditors. An estate planning attorney can help you decide on and create the type of trust that best fits your family’s situation.
Finally, make sure you have updated the beneficiaries on your retirement accounts, any insurance, and other accounts that have designated beneficiaries. Generally, this update is as simple as logging into your online account and updating the information under your account settings, but it can vary based on the type trust you have set up and the institutions involved. Keep a running list of the accounts and whom they would benefit were you to pass away so you can review it regularly and make updates as needed.
While young parents thoughts’ are often occupied with the day-to-day care of their new bundle of joy, it’s vital to consider the long-term personal and financial safety of their child should the worst happen. With an experienced attorney’s help, parents can help to ensure a child’s future- so they can enjoy every moment of the present.