Top 5 Estate Planning Must-Knows for New Parents
By: Cristin Gerczak, Esq.
February 9, 2021
As a new parent, you have a lot on your mind — if you’ve had enough sleep to think straight! Making sure your new baby is taken care of is at the top on that list.
Preparing an estate plan or updating an old one will help to protect your family’s future if something were to happen to you. Here are five estate planning must-knows for new parents.
Naming a Guardian in Your Last Will and Testament
If you pass away while your child is still a minor, typically the surviving parent will continue to care for them. In the unfortunate event that both parents pass away, however, it is important to designate someone you trust to be the guardian of your minor child.
Appointing a guardian (and a successor guardian) is something you do in your Last Will and Testament. If you don’t take the time to create a Will and designate a guardian, the courts will make this decision for you when you pass away — and their choice may not be someone you would have picked to raise your child.
You Need More than a Will
Yes, you need a Will to name a guardian for your minor child. However, having only a Will is not always the best estate planning strategy.
For example, a revocable trust will ensure that your assets are continually protected while ensuring that your child receives funds when they are required. A trust allows flexibility and structure in managing the assets you leave behind for your child.
Additionally, establishing a trust will enable you to avoid the time and costs of probate.
Choosing the Right Successor Trustee
Your Successor Trustee will be in charge of managing the trust assets and ensuring that your child receives his or her inheritance as you have outlined in the trust document.
Because of this, you will need to choose a trustworthy and willing Successor Trustee. Many people will choose a family member, but a neutral person (such as a trusted advisor or attorney) is also an option.
A neutral person may be a wise choice, because they can be impartial in making decisions. In other words, there may be less conflict with this option.
Beneficiaries on Accounts Override Trust or Will Designated Beneficiaries
Most bank and investment accounts allow you to add a beneficiary directly on the account. Typically, this is called a Transfer on Death (TOD) or Payable on Death (POD).
If you have this set up on your accounts prior to your new baby’s arrival and then you prepare a Will and / or Trust, the previously named beneficiaries on the accounts will override the beneficiaries designated in your Will or Trust. This is why it’s a good idea to review all accounts when preparing an estate plan after a new baby. This is also true for retirement accounts and any life insurance.
Pre-need Guardian for Minors
Estate planning isn’t just about planning for when you pass away, but also for times when you are incapable of making decisions for yourself or your child. This is called incapacitation.
You should have a Pre-need Guardian designated for your child to make decisions regarding their health care or finances until you regain the ability to do so yourself.
Every family’s situation is unique. Working with an estate planning attorney to look at the whole picture will help plan for the unexpected.
Cristin Gerczak, Esq.
Strategic Planning With Purpose®
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