New parents know the joy and indescribable love that comes with starting a family. Their first child, whether entering the family through birth or adoption, starts a new phase of life. That new child depends absolutely upon their parents. There is little they can do without your help. As such, it is a good idea for parents to take that extra step to help ensure everything is set in place in case they cannot be there to take care of that child.
Putting together an estate plan is a daunting task. Afterall, parents want to focus on the now, taking care of and raising their child to be the best possible person they can be. Parents do not want to think about what would happen if they were not there. However, taking control of these conversations helps to better ensure you put together a future that will help your child thrive. The following will provide two reasons you and your partner should work together to achieve this goal.
Reason #1: Guardianship.
Without a plan in place, the court will likely determine who raises your child. If you have a plan in place, you get to decide.
Reason #2: Finances.
Putting a plan in place that addresses finances can help to better ensure money is available to raise your children as you see best. You can have a trust that provides for college funds, another that saves money for when they want to buy a house and another for grandchildren.
Without these steps, the funds will likely become fully available to the child when the reach 18. As we all remember life at 18, we know we are not mature enough at this age to make wise decisions to help better ensure a lifetime of financial stability. We can help our children with this, even if we are not here.
Bonus round: Three documents to help get you started
New parents are wise to put together a will and trust. A will outlines how the court should distribute assets. A trust provides additional guidance on how and when a trustee should distribute finances. A trustee runs the trust and is a trusted individual or organization that you delegate. The trustee generally distributes the funds within the trust based on the rules you provide. For example, they could be given to cover tuition expenses for college or additional health expenses as needed.
It is also important to review beneficiary designations. Banking and other accounts often use these designations to state who receives the account when the owner dies. Make sure the names listed are appropriate and update as needed.
As noted in a recent post in Kiplinger, it is important for new parents to also include a living will. These documents explain how you would like your healthcare and finances managed in the event you are incapacitated. With these steps taken, you can rest easy that your child’s future is in good hands.