Caring for your newborn baby also means caring for their future—make sure they're protected with an estate plan
As soon as you are able to, be sure to get in touch with a real estate planning attorney. They’ll help guide you through the process of putting together a plan that meets your needs. Here are four major points for parents of minor children to consider when drafting an estate plan:
1. Purchasing Life Insurance:
Life insurance would provide a tax-free aggregate sum of money as a means of replacing lost income in the event of your death. You can choose from different life insurance options based on what your goals require. In any case, a sound life insurance policy would secure monetary funds for your spouse, providing them with financial protection and thus enabling them to continue providing for your child. If you are a single parent or if both you and your spouse pass on, the money from your life insurance can still be directed towards the care of your child or towards setting up funds to be distributed to them in the future.
2. Drafting a Will and Appointing Guardians
As a parent, two of the most crucial aspects within estate planning are the creation of a will together with the naming of a guardian for your minor child. Again, though the arrival of a new baby can be all-absorbing, this is a major decision that also requires your time and attention. You must give careful consideration to who you would want to raise your child should the worst happen. Every parent will have a unique approach to who they choose to name as a guardian, but a few things to take into account are shared values, health and longevity, and stability. This is one of the most important decisions you’ll make as a parent. Don’t take it lightly, and don’t procrastinate and leave your child’s future in the hands of a judge should the unthinkable happen.
3. Updating Beneficiaries Named on Accounts
While most of your assets will be documented and contained within your will, there are other accounts that may go directly to the beneficiaries ascribed to them. Some of these independent accounts may include life insurance policies, employee benefit plans, an IRA, or a 401(k) among others. Once you have child, you’ll need to have these accounts modified. Be sure to update appointed beneficiaries on these accordingly so that your child becomes the recipient. Should both you and your spouse pass away, your child will be able to rely on these accounts for financial protection, so be sure their name is in the record.
4. Considering a Trust for Your Child
If you are a parent of a minor, you’ll want to set up a meeting with your estate planning attorney to discuss setting up a trust. By creating a trust, you’ll be able to appoint a corresponding trustee to administer your child’s funds for them and lay out any directions for how you wish the trustee to carry out the management of money on your child’s behalf. These instructions can include requiring a portion of your child’s inheritance to be used to pay for college tuition or withholding the transfer of assets until your child turns a certain age. Establishing a trust can also protect your child and estate from having a judge appoint a trustee to control the finances and assets you’ve left to your child. In addition, you’ll avoid possibly having your child receive exorbitant amounts of money all at once at the age of 18.
The arrival of a newborn baby can really put things in perspective for you as a new parent. Suddenly, all of your time and attention are entirely devoted to caring for your little one. However, a major part of their care, though they may just be a newborn, is making sure that their future is secure. Get in touch with an estate planning attorney to discuss getting an estate plan started. This will provide you with peace of mind and your child with financial protection.