Becoming a parent is one of the most rewarding and life-changing experiences you can have. Along with the joy of welcoming a new child, it is important for new parents to think about how to secure their child’s future. Taking the right estate planning steps is one way that parents can do just that.
Write a will.
A will is a legal paper that says how you want your assets divided after you die. For new parents, making a will is key to first step in creating an estate plan. Without a will, state laws decide how to divide your assets. This can cause long court battles and family disagreements.
Choose a guardian for your child.
One of the most important choices you will make is who will raise your child if something happens to you. If you do not name a guardian in your will, a court will decide, and they might not choose someone who shares your values or parenting style. Think about the person’s values, parenting style, age, health and relationship with your child. Talk to them to make sure they are ready and willing to take on this role.
Consider creating a trust.
A trust is a great way to control how your children get their inheritance. While leaving your child money in a will allows them to access all of those funds when they come of age, a trust lets you set terms. For example, you might allow them to access only part of their money until they reach a certain age or achieve goals like graduating college.
However, it is important to remember that this estate planning tool only covers the assets you transfer to the trust. Pairing a trust with a will also ensures that you also have a plan for any possessions you did not place in trust.
Set up powers of attorney
It’s smart to set up a power of attorney for finances and healthcare. This legal document lets someone you trust manage your finances and make healthcare decisions for you if you cannot. For parents, this means someone can take care of your assets and make important decisions for your children right away, without waiting for court approval.
Review and update your plan as life changes.
Changes in your life like a birth, marriage or divorce can affect your estate plan. Keeping your estate plan up to date ensures that it always matches your current wishes and circumstances, and addresses your children’s evolving needs effectively.
Creating an estate plan can be an important step for new parents. Your plan can ensure that you provide your child with the protection, support and guidance they need.