What to think about once you become a parent
Being a new parent is both equally exciting and frightening. Exciting, because you’ve never loved something so much in your whole life, which is exactly why it is also frightening. Though having a newborn is an absolute game changer, it’s also the right time to make sure you’re fully protecting your little one in any and all circumstances. Let’s talk about some basics of estate planning for new parents.
Start by creating a will, which is far less intimidating than it sounds. A will gives instructions for how your assets will be distributed in the case of your death and can also name things like a guardian and healthcare instructions for your child. Get an attorney and have them help you prepare a professional, witnessed will that will hold up in court if anything happens to you. Start by designating a guardian for your child will help you designate a caregiver for your child, should the need arise.
In your will, you will also want to name beneficiaries for things like your 401(k) and life insurance policies. With most inherited assets, the beneficiary pays an estate tax, but on these assets they pay normal income tax. So, if you’re giving one child a $100,000 savings account and another a $100,000 401(k), it’s not actually the same amount of money. Speak with an expert to fully understand how your assets will be distributed and how taxes may impact your heirs.
Once you’ve named your children as beneficiaries in your will, you might want to put your assets in trust accounts. If you do this before you die, your children will pay less in taxes. They also won’t have to go through the probate process, where a will is proved in court, so they can access the accounts immediately. You can also put safeguards on these accounts, for instance making them inaccessible to your children until they reach a certain age.
Name Your Executor and Power of Attorney
The executor of your estate will oversee the probate process and other elements of carrying out your will, as well as pay off your taxes, creditors, and other outstanding payments. They are your representative when it comes to legal issues among your beneficiaries and also in any estate tax audits. Your durable power of attorney will act as your spokesperson if you become debilitated. This person pays your bills and handles legal processes for you. For both of these roles, pick someone close to you who you can trust.
Make an Affidavit for Your Funeral Arrangements
It’s not fun to talk about, but you should make an affidavit that outlines your wishes for burial or cremation, otherwise someone else will choose for you. It also helps relatives in the case of your death, as they have clear instructions and don’t have to handle the stress of making a decision when they’re in grief.
While it’s never easy to think about how your newborn will get along without you, estate planning is one of the best things you can do for your child’s future. It’s unlikely the plan will have to go into effect until your child is much older, but it will give you peace of mind knowing that if you’re not around, they’re still taken care of as best as you were able, and that their needs are being met per your instructions. Get started with your estate plan today. Schedule your Free Estate Planning Consultation with one of our attorneys.