As a new parent, it’s easy to get lost in a haze of diaper changes, feeding schedules, and sleepless nights. Estate planning may be the last thing on your mind right now, but it’s important not to overlook the steps that should be taken to ensure your family will be protected no matter what the future holds.
Choose a Guardian for Your Child
Choosing a guardian for your child is perhaps the most important function of an estate plan. If you fail to specify a guardian, you risk having your child be placed in foster care or creating conflict as your extended family debates who should assume this responsibility.
The guardian you choose should be someone who shares your values and can provide your child with stability during a time of crisis. People often choose a family member to serve in this role, but you are free to select a close friend if you wish.
Many people use their will to name a guardian for their child, but Georgia law provides a better option. Instead of using your will to name a guardian who steps in after you have passed away, you can name a standby guardian who can serve if you become ill or incapacitated.
In addition to choosing a primary guardian, you should list an alternate person who can step in if the first individual is unable or unwilling to serve when needed. Both of these individuals should be informed that they are named as guardians in your estate plan.
New Parents Should Create a Trust
Minor children aren’t allowed to directly manage an inheritance. Creating a living trust provides you with a way to leave a legacy for your child while ensuring that the funds are not misused. You can create stipulations for the trust, such as staggering disbursements or requiring funds to be used for goals such as post-secondary education.
The trustee of your trust should be someone you believe is capable of managing your assets in a way that will protect the interests of your child. Parents often choose the same person to serve as a guardian for their child and a trustee for their trust, but you are free to choose two different individuals if you believe this is most appropriate.
If your child was born with a disability, creating a special needs trust is the best way to leave an inheritance that can enhance their quality of life without jeopardizing their eligibility for important government benefits that can assist with medical costs and other needed services. Even if you are not currently receiving government benefits for your special needs child, creating this type of trust can ensure that they will be protected if their circumstances change in the future.
Make Sure Beneficiary Designations Are Updated
Assets such as retirement plans and non-qualified annuities pass outside a will according to their beneficiary designations. If it has been several years since you opened your accounts, the original beneficiaries may no longer be appropriate. There are also tax implications that should be considered.
A qualified estate planning attorney can help you determine who is the most suitable beneficiary for your accounts. In some cases, your spouse may be the most appropriate. In others, naming a trust as the beneficiary may be the best option.
Purchase Life Insurance
Life insurance can be used for a wide range of purposes, but this source of funds is a vitally important part of a new parent’s estate plan. While your employer-provided life insurance may have been sufficient in the past, it’s likely that you may now need to supplement your coverage with a secondary policy.
If you’re currently employed, you need insurance to replace your lost income in the event of your death. A general rule of thumb is that you should purchase life insurance equal to 10 to 20 times your annual income. However, this number can vary based on the number of children you have, your other assets, and your family’s expenses.
It’s a common misconception that only employed adults need life insurance. If you’re a stay-at-home parent, you need insurance that would allow your spouse to hire a person to provide the necessary care for your child if you were to pass away.
Term life insurance, which is purchased for a set number of years, is the most affordable option for most new parents. Whole life insurance is permanent life insurance with a cash value component, but it can be eight to 10 times the cost of a comparable term life policy.
Prepare for Illness, Injury, or Incapacity With An Estate Plan
People often think of estate planning as focused on what happens after a person dies, but an estate plan also helps ensure that your wishes are respected if you become unable to speak for yourself due to illness, injury, or incapacity.
Power of attorney documents give the person of your choice the authority to make decisions on your behalf. There are two different types of power of attorney: one for finances and one for healthcare. You can provide the same person with both types of authority or choose two different individuals.
An advance directive, also known as a living will, outlines your thoughts on what type of medical care you wish to receive in a life-threatening situation. This includes opinions regarding issues such as mechanical ventilation, tube feeding, blood transfusions, or palliative care.
Schedule Regular Estate Plan Reviews
Once you create your estate plan, it’s important to make sure it is reviewed regularly. Life changes such as an increase or decrease in income, the birth of another child, or a move to another state can necessitate an overhaul of your existing planning documents. Tax law changes can also play a role. A good rule of thumb is to have an attorney review your plan every three to five years—even if you think your general circumstances haven’t changed.
How Can Our Georgia Estate Planning Attorney Help Protect Your Family?
The Ward Law Firm strives to make the estate planning process as stress-free as possible so you can have the peace of mind that comes with knowing your child will be protected if something were to happen to you. Estate planning attorney David J. Ward will work with you to create a plan that fits your family’s unique needs. Please call our office or use our online contact form to request a consultation.