Congratulations on welcoming a new child into your home. This is a blessed time for you and your growing family, and we wish you the very best as you begin your journey into parenthood. As you can probably imagine, being a new parent is sometimes a little overwhelming. There is so much to learn and adjust to — lack of sleep, pediatrician appointments, learning how to navigate diapers, baby formula, securing car seats, and, yes, proper estate planning.
Do not worry if we caught you off guard by sneaking estate planning in there. Not many new parents think about the future when they are hyper-focused on the here and now. But estate planning is a topic you should consider sooner rather than later.
Below are a few basic estate planning tips every new parent should know:
Make sure you have a will
While everyone’s family dynamic is different and demands a uniquely tailored approach, a will is widely regarded as the starting point for any estate planning strategy. It is a written legal declaration itemizing how a person wants their affairs handled after death. This includes how your assets should be distributed, who gets what, details for final arrangements, and who should care for your minor children. Establishing a guardian for your child now ensures they will be cared for if something happens to you.
A few things to think about when choosing a guardian:
- Is this person willing to serve as your child’s guardian?
- Do they have the means to care for your child (financially, family structure, time commitment, etc.)?
- Do they share similar parenting styles and values?
- What is their location and living situation?
A will can be straightforward or very complex. If you are a new parent and are interested in a will, it is best to contact an attorney to ensure it is drafted and executed properly. Substantial legal costs, delays, and unnecessary tax liability may be incurred if your will is declared invalid after your death. Your property may also be awarded to someone other than who you wanted to have it, and serious questions will arise in terms of who should care for your child.
Think of your child’s financial future
While a will is an important estate planning step every new parent should know and take advantage of, it may not be sufficient to secure your child’s future by itself. This is why we recommend that new parents also create a living trust. A living trust is different from a will in that it can be created and managed during your lifetime. It does not just kick in when you die, which allows you to account for incapacitation and death. When you reach the point where you can no longer act on your behalf, the successor trustee that you named can step in and manage the trust according to your wishes.
This is important if you die or become incapacitated while your child is a minor. The successor trustee can manage trust assets for your child’s benefit without worrying about probate. You can also set the terms on how assets are managed, avoiding potential pitfalls such as your child having full access to a windfall of money once they turn 18.
Instead, you can determine such details as:
- Who manages assets for your child while they are still a minor
- When your child gets full access to assets
- If and when trust assets should be used to pay for your child’s education, healthcare, etc.
Contemplating a day when you are no longer around to enjoy your family, pursue your dreams, and relax with the people you love most can be painful — especially when you have a new child and are just starting out on your parenthood journey. Not only will we help you put a plan in place, but we will counsel you on which documents are best suited for your specific needs. And then make sure they are flexible enough to stand the test of time.