Having a child changes everything in your life and brings new responsibilities to care not only for their everyday needs but their long-term physical and financial well-being. Parents make plans for their child’s education and upbringing, but one of the most important steps is creating an estate plan to care for their children if they are not around.
Estate planning is not usually at the top of a parent’s list, especially in young families. Making a will or setting up a trust is often thought of as something you do later in life once your family is grown and you are preparing for retirement.
Four estate planning steps for new parents
The most important reason for putting an estate plan in place is providing for the care of your underage children if you die. Without a plan, those decisions are made by a court. Here are four essential steps:
- Life insurance: Raising a child is expensive, and if one or both parents die, life insurance will help cover the costs of raising your kids and paying for their education until they can pay their own way. For young parents, term life insurance premiums are usually affordable.
- Naming a guardian in your will: Many think of a will only as a way to distribute their assets after they die. However, the most important reason is for naming a guardian you trust to care for your children. Without that designation, surviving family members may be left to battle it out in court.
- Update beneficiaries: Once a child is born, beneficiary designations for assets such as retirement accounts and life insurance policies already in effect should be immediately updated.
- Consider a trust: Assets distributed from a will can’t go directly to a child if you die before they turn 18. A court may have to appoint someone to manage the funds left to a child. However, when you create a trust, you choose the person to manage it and set conditions on how the funds will be used.
Estate planning creates peace of mind for parents
Raising a child brings a new set of challenges, especially for first-time parents. An estate plan is a vital tool in making sure your child is raised according to your wishes in case of death or if you become mentally or physically incapacitated. An experienced estate planning attorney here in New York can help you look at the options for creating a plan to give you peace of mind while you’re still here to enjoy the ones you love for years to come.