This one is for all the new parents out there?grandparents, you too. What an exciting time in your lives! And while there is always a lot to do to welcome a new baby into the world, once all of the festivities have died down, the nursery is decorated, and you’ve settled into your new routines, there is still one crucial bit of work to be done: get an estate plan.
As the parent of a new child, you’re likely just starting out in life. You may not even own a home. You may think that you don’t have enough money or assets to make estate planning worth the time and expense. Now is the perfect time to start planning for the future! An estate plan is the best gift you can give your new child (or grandchild).
Estate plans come in different shapes and sizes. They are also highly adaptable. You can add new pieces and update older ones as your life evolves. For new parents, there are 4 key pieces to include:
- A Family Trust
- A Nomination of Guardians
- A Life Insurance Policy
- A College Fund
Although a complete estate plan includes other documents (like an advanced health care directive and a durable power of attorney), just completing these four pieces will have you well on your way to securing your?and your child?s?financial future. Here is a brief rundown of how each piece fits into a growing family’s estate plan:
The Family Trust is the centerpiece of any estate plan. Its main function is to dictate how your assets should be managed if something unexpected happens and you are unable to manage your affairs yourself. Even if you currently have only a few assets, you can still benefit from the framework a trust provides.
Once you have established the framework for managing your existing assets, anything you acquire after the trust is established is easily added to the trust, ensuring that the trust grows as your financial security does. Better still, trusts are also easily amended to provide for any future additions to your growing family.
Holding assets in trust ensures that there will always be someone to manage your assets for the benefit of yourself and your children.
Nomination of Guardians
The Nomination of Guardians is a document that allows you to choose who you would like to care for your children in the event that you are unable to do so. This is definitely the most unpleasant piece of the plan for parents to think about?but it’s also the most important one. Having your exact wishes written down will give everyone peace of mind in the unfortunate event that they are necessary.
While a family trust may feel like a fairly impersonal document, the nomination of guardians should be totally customized to your exact needs. If you think that one person would be a great caretaker, but you?d rather have another person handling your children’s finances, you can specify that in the document. If you have one caretaker in mind for your oldest child, but your youngest seems to gel better with someone else, you can specify that too. The idea is to plan for whatever will best suit your family’s needs.
Life Insurance is a way to provide a safety net for your family if you pass away, to ensure that they have a steady stream of money to meet their needs. There are a few different ways a policy can be incorporated into your estate plan, and you should speak with your attorney and financial advisor to see which will be most beneficial for your particular family.
Before purchasing a policy, however, the first step is to consider what needs the policy should cover. Do you want the policy to replace your salary? To pay off the house so that there are fewer expenses? Or do you just want to provide additional income to ease the pressure on your spouse or child’s guardian while they get affairs in order?
Once you have an idea of what you are hoping to achieve with the policy, you can decide what type of policy to buy, who the beneficiary should be, and how much coverage you would like. Your attorney can then help you decide how best to include the policy in your plan.
As with your retirement savings, it’s never too early to start saving for your new child’s educational future. By including a designated educational fund in your estate plan, you are better able to control and direct the use of those funds as your child’s needs evolve. Keeping that in mind, there are a variety of options for educational savings plans; a financial advisor can help you decide which option is right for you.
Estate planning may seem like the very least of a new parent’s concerns, but as you can see, a solid plan for the future is truly the best way to provide a solid foundation for your new child. With only a little time and effort, you can establish secure framework that will grow with your family for years to come!
Jacqueline Dailey is an Associate with the Law Office of Paulla Hyatt-McIntire. Her practice is focused on providing quality legal counsel for all levels of complexity in estate planning, trust administration, probate, business succession planning and tax planning. Prior to joining Paulla’s practice, Jacqueline worked at Andersen Tax, a wealth and tax planning firm in San Francisco. In addition to Jackie’s experience in law, she enjoys taking weekend trips, going to Giants games, and coaching Moot Court for UC Hastings.
This article appeared in the Spring 2015 issue of Me & Mine Magazine.