You’ve created your baby registry, set up a beautiful nursery, and packed your bag for the hospital. But one of the most important things you need to do doesn’t involve any adorable booties or sweet crib mobiles. It’s estate planning. Estate planning is often the item that is left off the checklist because it’s not the first thing that comes into parents’ minds but it’s actually an essential part of preparing for a new baby. It ensures that you have everything in place in case something happens to you, your partner, or your child. Without proper estate planning your child is at risk of not receiving your assets or having a legal guardian in place. Here is a short primer on what new parents should be thinking about when it comes to estate planning.
What is the first step?
One of the first steps of estate planning is putting together a will. A will is a legal document that contains your exact wishes for the distribution of your property, management of your accounts, and the custody of any dependents (aka children). You may already have a will in place from before you were expecting but it probably needs to change when you have a child. Start by putting together a list of all of your assets such as property, insurance policies, vehicles, bank accounts, jewelry, etc. Then determine who you will receive these items if you were to pass away. The other big decision in a will is who will become the guardian for your child/children.
What should I think about regarding guardianship?
Choosing a guardian is an incredibly important and personal decision. When evaluating options consider factors like a child’s age, geographic location, religion, and willingness to accept the position. Have a discussion with your potential choice of guardian to make sure they are willing to accept the position and that you are both on the same page in terms of your wants on how you want your child to be raised. Also, make sure to identify a backup option just in case and have that option listed in your will as well.
Do I need a trust?
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. With a trust, you can be very specific about who, when, and how you want someone to receive your assets. You may be able to make similar specifications in a will but a will has to go through probate court which is an expensive and time-intensive process. Typically a trust is appropriate for someone that has greater than $160k in assets and has a specific vision of how they want those assets to be distributed. There are many different types of trusts that are based on things like who the beneficiary is or what the assets are. Historically trusts have been associated with the extremely rich because they often can be costly to create and manage but they can actually be a useful tool for anyone that has more specific needs than a will.
Is there anything else I need to look into?
Separate from a will you will need to make sure you designate the beneficiaries on any insurance policies, retirement accounts, and other financial accounts. You want to make sure that who you have listed as a beneficiary on the account matches whomever you have listed in your will. However, if by chance, this ends up not being the case the beneficiaries listed on the actual account will supersede the who is listed on the will.
How much does estate planning cost?
The cost of putting together a will depends on how much you do on your own and how complicated your assets and accounts are. At the low end of the range, it can cost a few hundred dollars and can go up to thousands of dollars. Other factors that can impact the cost are the state of residence, the size of your assets, whether or not you are utilizing a lawyer, and how many beneficiaries you have. Trusts are often more expensive than wills because they are more complicated and are much more customized to the individual. In addition to the initial fees, you will want to revisit and review your plan every few years to make sure that it still matches your needs. Any updates will incur additional costs.
Who can help me with estate planning?
While it can seem like the cheapest option is to write your own will and do all of your estate planning on your own, it can become costly in the long run if there are mistakes made. However, many new parents are not equipped to pay a lawyer thousands of dollars to help with estate planning. One affordable option is to use a service like Trust and Will where you can create a customized plan in less than 15 minutes. They have plans starting at $39 and are backed by a team of experts to make sure your plan has everything you need. You can start by just answering a few questions and have Trust and Will help you figure out what type of plan is best suited for your needs.
Once you have established an estate plan, keep several copies in a safe place. Remember as you grow your assets to make additions to your will so it is accurate and up-to-date. Having an estate plan will ensure that your children are taken care of and protect your assets should anything happen to you. It should be part of every new parent’s to-do list.
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