New Baby? Time to Create Your Estate Plan

Have you just welcomed a baby to the family? Protecting your newborn goes beyond car seats and babyproofing. Ensure that your child is protected no matter what life brings by creating an estate plan. Establishing an estate plan is one to-do task that many people put off. They may delay this very important task due to lack of time, the belief that they do not have enough money or property, not knowing how or where to start, or fear of contemplating death. Whatever the reason, if you have just welcomed a baby, it is time to meet with an estate planning attorney to implement a plan.

In simple terms, an estate plan comprises a collection of legal tools that outline how you want your money and property to be distributed and who will care for your dependent loved ones while you are alive but unable to manage your own affairs (incapacitated) or after your death. Working with a qualified estate planning attorney is the best way to ensure that your plan works as intended and fully protects your family, including your newest addition.

Provide for Your Child’s Care

One of the most important reasons for a new parent to have an estate plan is to nominate a guardian for their minor child. This is a big decision that you surely want to weigh in on rather than leave to the court’s discretion. The guardian will be the person who will care for your minor child if you and your child’s other legal parent die or become unable to care for your kids during your lifetime. Nominate a guardian who is willing and able to care for your minor child and who shares your values and parenting philosophy. There are a few different ways you can legally nominate someone to care for your child.

Nomination in a Last Will and Testament

A last will and testament (often referred to simply as a will) is the document in which you can officially nominate a guardian—ideally, along with backups—for your minor child. Parents who set up a trust rather than a will to determine how their children’s inheritance will be handled still create what is called a pour-over will, which includes your guardian nomination.

While naming a guardian in your will can bring peace of mind, remember that a will takes effect only after your death. It does not address who would care for your child if you became incapacitated during your lifetime.

Nomination in a Separate Writing

Depending on the laws in your state, you may be able to nominate a guardian (and backups) for your minor children in a document separate from your will and then refer to that document in your will. In some states, this separate document becomes effective only upon the parent’s death, while in others, it may also apply if the parent is alive but unable to care for their children due to incapacity. Regardless, some parents prefer this approach because it is easier to update the separate document (which they could likely do on their own if they follow witness and notary requirements) instead of changing the will, which may require a trip to their attorney’s office.

Delegation of Parental Powers (Power of Attorney for Minor Children)

In some states, you may be able to nominate individuals to act on your child’s behalf in the event you are temporarily unavailable to make certain decisions. This type of document takes effect immediately; you need not have passed away or become incapacitated for it to work. This tool gives the person you appoint (called the agent in this type of document) the authority to act on your child’s behalf for healthcare decisions and other matters (but not to consent to your child’s marriage or adoption). This document can be helpful if you are out of town and are leaving your child with a grandparent or trusted family friend. If they need to sign a permission slip or take your child to the hospital, they will be able to act without waiting for you.

Distribute Your Things

While some of your money and property (e.g., bank, investment, and retirement accounts) may have purely financial value, your other belongings may have deep emotional worth. A proper estate plan should address both. Whether you are using a will or a trust as your foundational estate planning tool, you can leave instructions about who will receive your financial accounts and your prized possessions or family heirlooms. Such instructions can be very important if you want to leave a specific item to someone other than an immediate family member.

Of course, deciding who gets what is only part of the equation; the process your loved ones will go through to distribute your things matters just as much. This is where the choice between creating a will or a trust—or doing nothing at all—makes a significant difference.

Probate is the court-supervised process of wrapping up a deceased person’s affairs. The process consists of multiple steps, including presenting a decedent’s will (if they had one) to the probate court, gathering the deceased person’s accounts and property, paying off debts, and distributing what is left to the decedent’s loved ones. Your will guides the court in distributing your money and property to the appropriate individuals. If you do not have a will, state law takes over, and the results may not match your wishes.

The alternative to a will is a revocable living trust. A trust is a legal tool that holds your property for your benefit during your lifetime and then passes it on to your loved ones after your death. A properly funded trust can save your family time, money, and heartache by helping them avoid the slow and public probate process. It also gives you control over how and when your child will receive their inheritance, preventing an immediate lump-sum distribution at age 18, which is often inadvisable. While a will can also include what is known as a testamentary trust with instructions similar to what you would include in a revocable living trust, your loved ones must still file your will with the court and go through the probate process.

Make Your Wishes Known

An estate plan is not only about what happens after you die; it also addresses situations in which you are sick, injured, or unable to make decisions on your own. A key part of this type of lifetime planning is naming an agent in a medical power of attorney (healthcare proxy) to communicate or make medical decisions on your behalf when you cannot. Serving as an agent under a medical power of attorney is an enormous responsibility. You can help ease the burden by communicating your healthcare wishes in advance so your agent is prepared when the time comes. One way to specify your wishes is with a document called an advance directive or living will. This tool provides written guidance about your end-of-life wishes, ensuring that your loved ones do not have to guess what you would have wanted.

What if you need someone to step in and manage your finances when you cannot? This could be for a simple reason, such as selling a home while you are on vacation or more serious instances such as being too ill to complete a transaction yourself. A financial power of attorney is a legal tool that allows you to name an agent to manage your financial affairs on your behalf. You decide whether you want your agent to have broad powers, such as managing your bank accounts and paying bills, or authority to act only in a limited circumstance, such as signing a single document. Depending on how your financial power of attorney is set up and your state’s laws, your agent may be able to immediately act on your behalf—even while you are still able to manage your affairs—or only if you become incapacitated. Either way, appointing an agent does not take away your right to manage your own money while you are still able.

Find an Estate Planning Attorney

Having a baby is a huge milestone to celebrate and the perfect time to shape a plan for your family’s future. You have prepared for their arrival in countless ways, from setting up the nursery to babyproofing the house. Estate planning is just as important.

Your estate plan will give you peace of mind by protecting your child, appointing their guardian, and ensuring that their financial future is secure no matter what. If you already have a will or trust, now is an ideal time to update it.

Act now. The greatest gift you can give your child is protection with a comprehensive estate plan that will provide for their future. Contact us today for a consultation to learn how we can help you protect your family’s future.