Congratulations! Your new baby is home and healthy. You are finally sleeping normally and enjoying your little bundle of joy. Now that you’re thinking clearly again, it’s a good time to put together a quick and easy estate plan…just in case. Here are the six steps to remember when preparing your first… Last Will and Testament.
First, let’s take a look at the seven document areas you should eventually consider as part of your overall estate plans. These include:
1. Last Will and Testament,
2. Power of attorney,
3. Health care directive or power of attorney,
4. Personal Instructions to the Family,
5. Designated Beneficiary Plans,
6. Living or testamentary trusts and
7. Gift programs for life.
The last will and testament, is the first and relatively inexpensive starting point that all new parents should consider. A lot of thought should go into each of the six steps below. But remember that you can always change your mind, so it’s better to have something now than to have nothing ready in case a problem arises.
Six steps for new parents
Step 1 – Personal Guardianship: As a new parent, you need to think about who you and your spouse would like to care for your child(ren) in case something happens to both of you. This care can be divided into personal care and financial care. While both situations can be handled by the same person, it is often better to separate them. Some people who are very loving and family-oriented may not have the time or aptitude to handle the financial side.
Step 2 – Financial Guardianship: It is often easier and more efficient to designate someone else to specifically handle the financial aspects of your estate and the guardianship of your children. You may have a relative or friend who is really organized and great with numbers, but isn’t that interested in kids or raising a family. They can be a perfect fit for the financial guardianship role in case something happens.
Step 3 – Executors/Personal Representatives: An executor is the person or persons who will be in charge of the administration of your estate. Someone who is organized, good with numbers, and familiar with your family is usually a good fit. They will need to organize, process, and distribute income from insurance, pension benefits, 401Ks, IRAs, Social Security survivor benefits, as well as property assets, mortgages, and other liabilities. This person may also be a good candidate for financial guardianship as mentioned above.
Step 4 – Beneficiary Designations: Many specific investment vehicles, including IRAs, pensions, and life insurance, have their own beneficiary designation plans attached to them, but for things like savings, brokerage accounts, real estate, and other personal assets, you need to plan for the distribution of these assets making supplies through your will.
Step 5 – Omissions: Hopefully this will not be part of your situation, but if you have people or children that you are specifically omitting from your will, you should provide a summary of who and why you want them omitted. This could be a former spouse or children from a previous marriage, children with special needs, or various other situations that may arise. If you think any of these apply, you should seek expert advice before finalizing your plan.
Step 6 – Witnesses and Update: Making sure you have selected the right witnesses is a vital part of the process of executing your last will and testament. No one who is a minor or designated as a beneficiary, executor or guardian should be used as a witness, as this could create a potential conflict of interest and may be a problem in the future. You should also get in the habit of regularly reviewing and updating your estate plans, especially in the event of any of the following events. Births, deaths, disabilities, marriages, inheritances, or job changes can be a trigger that it’s time to see if your existing plans still meet your needs.
In summary: While having and raising a new baby is one of the most exciting adventures you’ll ever have, it also creates the need for additional short- and long-term financial and estate planning. Unfortunately, many young families never take these steps, and then the state decides who will take care of their children, take care of their financial affairs, and even who is legally entitled to receive their assets.
By taking a proactive approach and spending a little time writing your last will and testament, you can control each of these situations. You will make sure that your children are cared for the way you want, by the person you want and that your financial affairs are handled by someone. your to choose. This will usually make things go smoother, reduce headaches, and save your survivors thousands of dollars.
