Your bundle of joy has arrived, and all of your preparations have paid off. The car seat is installed, the crib is assembled, and your drawers are filled with brand-new tiny clothes. You are ready to welcome home your new son or daughter. Or are you?
If you haven’t met with your Estate Planning lawyer to revise your Will and Trust and name a guardian for your new family member, then you are not quite ready to relax into parenthood. No worries! We can walk you through everything that needs to be done and help you get the peace of mind you need to enjoy your new role.
Why an Estate Plan Is So Important Now
We say it’s time to revise your Estate Plan, but that assumes you already have one. If you don’t, you are not alone. For many couples, the birth of their first child is what motivates them to write their first Will and talk to an Estate Planning attorney about additional protections. It is vital that you have a plan in place now in case something should happen to both you and your spouse and the child is left alone.
This sounds tragic—and it is—but it’s not as unusual as you might think. Imagine leaving your baby with a grandparent so you can have a much-needed date night, but you are in a horrible car accident. If you are a single parent, it is even more likely that an accident could leave your baby parentless. We don’t say this to scare you but rather to stress the importance of getting an Estate Plan together as soon as possible after the addition of a child.
What an Estate Plan for Families With Children Should Include
Generally speaking, your Estate Plan should make provisions for your child’s care and financial security in the event that you and your partner both die or are left incapacitated. You can achieve those goals with the following tools:
- Will. A Will is important because it not only names your child your heir but it is also the document in which you designate a guardian who will raise your child if you and your spouse are both gone. The guardian decision is a difficult one, but it is one that you can revise as needed over the years. For example, when your baby is young, grandparents might be a good option to serve as guardians, but as they age, you might need to choose and aunt, uncle, or friend.
- Power of Attorney. This document comes into effect if you and your spouse are both incapacitated in some way. This could mean that you are physically unable to express your wishes or that you are unavailable—for example, traveling out of the country—in a time of need. Your Power of Attorney agent will have the authority to make medical and financial decisions on your behalf.
- Trusts. While you can name a child in your Will, the better tool for leaving money to them is a Trust. When assets are held in a Trust, they will be distributed according to your specific instructions. These assets will also avoid Probate. You might stipulate that a certain amount of money goes to the child’s guardian, into an education fund, or is held until the child reaches a certain age. If your child is born with a disability, you will probably want to also set up a Special Needs Trust to provide for their care.
- Beneficiary designations. Your spouse will likely be the primary beneficiary on pensions, retirement accounts, and insurance policies, but you should name the Trust as a secondary beneficiary in case something happens to both you and your spouse. Since you can’t name a minor as a beneficiary, naming the Trust is how you ensure that the money will go to your child eventually.
At Ross & Shoalmire, our Estate Plans are tailored to each individual client to meet their specific needs and desires for their families.