So You’re Having a Baby?

Oct 2014

So you found out you are having a baby. The first things that run through your mind are the cost of baby food, diapers, college education and for the first few months of your new baby’s life, the amount of time of lost sleep. However, having a newborn child should also trigger some changes in your estate planning.

Estate planning becomes even more crucial for anyone who has younger children. Even though you may not have significant assets accumulated, it is important to determine how assets will be distributed if both you and your wife (or partner) both pass away.

I always tell clients the most important function of estate planning when there is a minor child is who would become the guardian of that child if both you and your spouse pass away. If you are naming a husband and wife as guardians, you also need to consider what would happen if that couple later becomes divorced to ensure that your child would remain with one of those guardians.

You also need to determine who a trustee would be of your trust. Frequently, you may name your parents, siblings or close friends. By naming a parent(s) you also need to recognize at some point they may pass away. Therefore, it is suggested that you have an alternate successor trustee as well.

Even though new parents are generally young, energetic and healthy, it is important for you to determine who would make healthcare decisions for you if you are not able to make those decisions yourself. Typically, your spouse would be the first choice followed by alternates. In the event you are not able to make your own healthcare decisions, an appointed patient advocate would make those decisions for you.

Once you have made these decisions I then recommend that you speak with an estate planning attorney so that the appropriate documents can be drafted. An estate planning attorney may also think of other alternatives and help you with additional decisions related to your estate plan for your new child and for the future.

As a new parent, one does not think of their own impending death or in the event they become disabled. However, these are additional considerations that must be taken into effect. When I meet with clients with younger children I frequently will discuss the need for life insurance. Life insurance is used as a replacement of your lost income in the event you pass away. Therefore, it must be determined how much life insurance death benefit you should have and for how long a period of time should one have coverage for. Our firm generally recommends a level term life insurance policy. Therefore, you are only purchasing life insurance for a certain length of time whereby the premium does not change over the period of time.

In addition to life insurance, it is also important for younger individuals to have disability insurance in the event they are disabled and not able to work. You may be able to obtain disability insurance through your employer. This is typically through a group plan and is generally at a lower cost to you and may also be done as a payroll deduction for pretax purposes. In the alternative, you should speak with a disability insurance specialist if you do not have disability insurance through your employer so that you may determine what the options and benefits are with disability insurance.

While raising children is a full time job in itself, you also need to take some time to make sure those precious children will be taken care of in the event something happens to you or your spouse. And estate planning is the best way to do that.

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