Adding a child to the family requires new estate planning.
Are you pregnant?
Did you recently give birth to a child?
Are you in the process of adopting?
If the answer is yes, let me first congratulate you.
This is an exciting time for your family as it grows.
You are likely debating the name, selecting pain colors, and purchasing diapers.
According to a recent Motley Fool article titled “As a New Parent, I Took These 3 Estate Planning Steps,” you should also create or update your estate plan.
A child requires greater protections and provisions if something happens to you as the parents.
What do you need?
You likely have dreams and goals for your child.
You want him or her to have the best future you can provide.
If something happens to you, your family will take a hard financial hit.
Your family may be left in raw survival mode.
College may no longer be financially viable.
Life insurance can help.
A term life insurance is less expensive than a whole-life policy.
However, a life insurance professional can help you evaluate the benefits and drawbacks of each.
The key is to have the right amount of insurance based on a thorough needs-analysis.
This can help you provide for the day-to-day care of your child and even fund college education.
Create a last will and testament.
Although a last will designates heirs for your assets when you die, it does more than this.
It allows you to actually control what happens to the inheritance you leave to your minor child.
As a minor, you child cannot personally manage the money.
The funds will require an adult to manage the funds on behalf of the child.
If you do not designate this individual, the court will select a custodian for the funds.
Without estate planning to provide otherwise, your child will receive the full inheritance with no restrictions at age 18.
Trust me, that can be an exciting “train wreck” to watch!
The money you left could be quickly squandered by an immature and naïve young adult.
Work with an experienced estate planning attorney to make sure your last will and testament meets your goals and protects the inheritance for (and from) your child.
Designate a guardian.
Who will take care of your child if orphaned?
Although the idea is unpleasant, you need to consider this question.
You will want to select someone who loves your child, holds similar values, and will keep your child closely connected to family.
If you do not designate a guardian, a judge will select someone.
When you and your spouse select a guardian, discuss your wishes with that individual before formally nominating him or her.
In short, you need to know now whether he or she will accept the responsibility later.
While you are at it, select a backup guardian.
When it comes to estate planning, redundancies are prudent and practical.
Although estate planning is the least exciting aspect of welcoming a child into your family, it is one of the most loving things you can do.
Reference: Motley Fool (Feb. 23, 2020) “As a New Parent, I Took These 3 Estate Planning Steps”