5 Big Things New Parents Need To Do With Their Estate Plans

Becoming new parents is an exciting and beautiful roller-coaster ride. Your new child will bring so much joy and love into your life. In this season of new life, adjusting to giggles, smiles, and lack of sleep a million things are probably racing through your head. Estate planning is likely at the back of that list, behind diapers, baby food, and the pile of laundry that seems to never end. 

But estate planning is an important tool for new parents as many aspects may need to be updated. It is important to not only plan and prepare for your child’s current needs but also their future needs should anything happen to you or your spouse.

Today, we wanted to bring you an article that talks about the changes new parents should consider making to their estate plans. Let’s dive in.

Modify your will

Often the first thing that comes to mind when you think about estate planning is a will. Wills are the cornerstone of your estate plan and once you have kids, you will need to establish a couple of important provisions particularly selecting and naming a guardian and trustee.

A will encompasses much more than spelling out a formal succession plan for your assets, it is a place where you are able to name the people who will have the legal responsibility to raise and care for your children should something happen to you and your spouse. 

Selecting a guardian for a child means choosing a person who will oversee the care and raising of the child. Guardians have a legal responsibility to raise the child in their care and provide basic necessities like housing, food, schooling, and anything related to their livelihood. 

Needless to say, appointing a legal guardian is an important job, one that you and your partner need to consider with great care. Before choosing a legal guardian, be sure you sit down and have a conversation with them to outline the responsibilities and see if they are up to the task. This is not something you want to blindside anyone with. These open conversations will give you and your child’s potential guardian the opportunity to be on the same page. 

If you don’t name a legal guardian, that decision will fall to the court. This is such an important decision and should be made with thought and care not by legal proceedings. 

The next person you will want to name in your will is your child’s trustee. A trustee handles the financial aspect of a child’s life like schooling, taxes, investments, and the distribution of any inheritance at the proper age. You can choose to have one person be both the guardian and the trustee it all depends on your comfort level and what makes the most sense for your situation. 

Again, be sure to talk with this person before you make it legally binding. Even though this is a tough conversation, it is better to create a plan you want rather than that choice going to the court.

Look into your insurance needs

You know that life insurance policy you’ve been meaning to get? Well, now is the perfect time to reevaluate your insurance needs. Caring for a child is expensive and should something happen to you or your spouse, you want to be protected.

Determining the type and scope of your insurance needs depends on a few factors:

• Your net worth
• Debts
• Projected future expenses
• Size of your family

For most parents, term life insurance is the best option. The premiums are affordable and you are able to purchase the insurance to cover a certain period of time, usually, until your child is no longer a minor or when they won’t be completely financially dependent. Your financial planner will be able to help you evaluate your unique insurance needs and make a plan for the type of policy that will serve your family best. 

You’ll also want to look at adding your child to your health insurance policy. Most policies have a limited time frame where you can add a new member to the plan. Check-in with your specific coverage to see how to add your child.

Establish financial and medical powers of attorney

A power of attorney is a legal arrangement that allows someone to make decisions on your behalf should you be unable to do so yourself. Establishing these designations will be really important for both the financial aspects of your estate and your personal medical needs. There are two types of POAs you’ll need to select:

• Financial 
• Medical directive

A financial POA gives the person of your choice the ability to make financial decisions on your behalf. This person will be responsible for bills, taxes, debts, and other expenses incurred by your estate. 

When you select a medical POA, you are choosing a person to make medical decisions on your behalf should you become incapacitated. This person will be the main point of contact for medical staff and will help carry out your wishes. As you will hear us say time and time again, sit down and have a conversation with this person before you name them as your medical POA. You will want to not only see if they are willing and able to do it but also be able to specifically outline your wishes so they know what you want and not have to interpret what you want. 

You can have the same person perform both the financial and medical POA duties but since both responsibilities are so intensive it might make sense to choose two people who work well together and can lend support to each other. 

Revise beneficiary designations

Beneficiaries are the people who inherit an account, policy, or asset from another person. You have to name beneficiaries on all sorts of accounts like:

• Bank account (checking and savings)
• 401(k)
• IRA
• Insurance policies
• Trust
• Other investment accounts
• Real estate

In essence, any asset that you have established needs a beneficiary. You may want to name your child as a new beneficiary on one or more of your accounts (keep in mind that minors can’t control property) and now is a good time to look into that.

Naming beneficiaries is an important task as these designations outweigh those in your will. Say, for example, you have an ex-spouse as a beneficiary on your life insurance policy but name your child as the beneficiary of that same account in your will. The beneficiary designation on the policy itself is the one that will be valid in court. Since a beneficiary designation is more legally binding, it is important to review your beneficiaries periodically to ensure everything is up to date.

Work with your team of professionals

Estate planning is a complex process, one that requires a strong, cohesive professional team to get right. It is always important to seek the counsel of your estate planning attorney, financial planner, and tax professional in order to create a holistic, comprehensive estate plan that is tailored to fit your needs. 

Our team at Legacy Wealth is passionate about estate planning and helping you craft a strong estate plan that provides comfort for you and your family. We are here to help you see the entire picture of your financial life and estate planning is a big part of that. 

Our team loves to help families use their finances in a way that enhances their lives and creates a legacy that starts today and lives on far into the future. 

Ready to get your estate plan in order? Schedule a 15-minute call with us today to see how our team can serve you.