Whether you are a new parent or expecting your first child, one of the scariest questions you will ask yourself is what would happen to your family if something were to happen to you. Rocket Lawyer’s legal documents can help you to protect your children and grandchildren and plan for the future, giving you the peace of mind to focus on what matters most to you and your family.
Here are the essential tasks that all families should complete when preparing for a new baby:
1. Choose a Guardian and Assign Power of Attorney
A Guardian is the the person who legally has the care and management of a child and/or his/her property until he/she turns 18.
A Power of Attorney for a Child allows you to grant another adult the ability to make decisions for your child in your absence (or you and your spouse’s, if you’re married). This is important because if you were to unexpectedly pass away, the County would look to these documents when deciding who would be the best person to care for your children and make legal, educational, and medical decisions for them. This procedure varies in each state, so you’ll want to check your local rules—or ask a lawyer in your area—to see how to create the right guardianship documents for your family.
2. Authorize child care and/or medical treatment
Similar to the Power of Attorney for a Child, a Child Care Authorization is an agreement where parents can grant limited powers to someone else to make decisions regarding their children. For example, you could use a Child Care Authorization to allow your nanny or trusted family friend to call in on your behalf to a daycare about changes in your child’s schedule or to pick up your sick child from school. Further, for any trusted caregiver, you may also want to prepare a Consent for Medical Treatment of a Minor, allowing that person to seek emergency medical treatment for your child in your absence.
3. Buy life insurance
Most adults never consider buying life insurance until they have their first child. If you have young children, a life insurance policy would help your family pay for final expenses and maintain their standard of living in the event of your death. People use life insurance proceeds to pay for (1) funeral cost, (2) existing loans and debt, like credit cards or a mortgage, (3) childrens’ college savings, and (4) daily living expenses.
Many employers offer life insurance policies, but the coverage may be less than your family would need if you unexpectedly passed away. If you reach out to the private insurance market, you will find many types of policies, but the most common policy for young families is a term life insurance policy, which covers a predefined number of years and coverage amount. Term life insurance policies are generally more affordable than whole life insurance and for most young families, an individual term policy will provide the protection you need at a cost you can afford.
How much life insurance should you purchase? Each family is different, but the most common recommendation is that a life insurance policy should total five to ten times your annual salary.
Life insurance has another added benefit: the proceeds are not taxed. The IRS website confirms that if you receive the proceeds under a life insurance plan as a beneficiary, the benefits are not considered income and do not have to be reported for the purposes of income tax. However, if you receive any interest on the proceeds, that interest is taxable and should be reported to the IRS.
4. Make a will
New and expecting parents will also want to create estate planning documents. Rocket Lawyer has all of the documents you need to create the right estate plan for your family.
Every individual needs a Will. A Last Will and Testament is the document that provides for the orderly disposition of an individual’s assets after death. When you’re writing your Will, you designate beneficiaries to receive your property, whether in general or for specific pieces of property. A Will can also be used to nominate a guardian to care for your children.
If you live in California and have real property or an estate over $150,000, you should also consider creating a Trust. A Trust is a legal entity established either by a Living Trust agreement signed by a person during his/her life or arising after death in accordance with the terms of a Will. The Trust is governed by the terms in the trust agreement or the Will.
To learn more about inheritance and estate planning, check out our estate planning guide.
5. Keep good records
Lastly, it’s always a good idea to keep backup documents with important medical, legal, and educational information. We recommend keeping paper and electronic copies of all your important legal documents including birth certificates, social security cards, passport, your child’s medical records, any child care forms, and your will and trust. As a Rocket Lawyer member, you can upload documents directly to your account for safe-keeping.
How else have you prepared for the new addition in your life? Tell us in the comments below!