Planning for a new baby is one of the most exciting chapters of a parent’s life. It’s a time when you’re looking forward to meeting the newest member of your family and making sure that the world they enter into is joyous and peaceful. But with all of this excitement comes the stress and pressure to fully care for another human being.
And if it’s your first child, it’ll be the first time you understand
that there is now another person who needs you- in its purest sense…
It follows that preparing for a new baby entails everything from scheduling birthing classes to planning work-leave and baby proofing your home. And since you are now such an indispensable part of this world, part of planning for baby is about putting safeguards in place for the contingency that you may not always be around. One of the most important things parents can do in this regard is often overlooked: creating or updating their estate plan.
Here are four important planning considerations for new or expecting parents:
- Choosing Guardians. Parents who delay in nominating a guardian for their children usually do so because they cannot agree on that “perfect” choice. Get comfortable with the fact that there may not be a perfect choice yet! If you don’t choose, a court will choose for you. Remember that you can always amend your choice if you change your mind. When choosing guardians, think about choosing someone who shares your beliefs and who will naturally be a part of your child’s life. Make sure whomever you choose is willing to take on the responsibility of raising your child if you are unable to do so.
- Saving for College. The cost of college/university is already sky-high. You probably want to start saving right away, either through a 529 plan or an educational trust so you can realize some tax benefits while you save.
- Passing on your assets. Assets cannot pass directly to children who are under the age of 18. Consider setting up a trust and naming a trustee to manage the assets you would leave your children. Otherwise, a court would manage your assets, on your dime, until your kids reach adulthood. It’s also important to talk to your legal advisor about the beneficiary designations on your retirement accounts and insurance policies to be sure your child will receive the proceeds in the most efficient and protected way possible. Even if you name your children in a will, beneficiary designations on these accounts will determine who inherits and how.
- Asset protection. As of 2019, if you are married and have a combined estate worth more than roughly $11.4 million (5.7 million if single), you will want to discuss asset protection strategies that will help you minimize taxes and protect assets for your children and heirs.
Naturally, the thought of planning for your estate is not the most pleasant thing to do when you’re preparing for a beautiful event like the birth of a new child. But doing so doesn’t have to be stressful as long as you have a clear vision of what you want the outcome to be. In fact, once you have your plan in place you will feel much more at peace that the child you are bringing into this world will always be taken care of.