Why is estate planning important for new parents?
It is never too early to make decisions about who to leave your assets to after you pass away, but estate planning is especially vital for new parents. This is because estate planning is also about arranging to allow someone to make decisions on your behalf and take care of your child or children should you become incapacitated. Important parts of the estate planning process for new parents to consider include:
- Selecting a guardian of your children.
- Preparing for unexpected injuries, illnesses, or death.
- Ensuring the financial security of your children, partner, and other loved ones.
What legal documents are essential for new parents?
Being a new parent does not leave much time for anything else. Estate planning, however, can make all the difference for your family in case something goes wrong. The following estate planning documents are key components of a new parent’s plan:
- Last Will and Testament: This is the main document in an estate plan. It allows you to designate beneficiaries to receive your assets after you are gone. It also lets you make other plans, such as designating a guardian for your minor children. You can make changes by signing a Codicil to Will. It is generally advisable to have an estate planning lawyer review your documents every few years to see if changes are necessary.
- Living Trust: A Living Trust protects your assets from creditors during your life, and it allows at least some of your estate to skip the probate process when you die. You can create a revocable Trust, which you can get rid of during your lifetime if you choose, or an irrevocable one. If you are married, a Joint Living Trust can cover both your and your spouse’s assets. Individuals with large estates are encouraged to seek legal advice about the possibility of estate tax liability.
- Durable Power of Attorney: A Durable Power of Attorney is a legal document that lets you designate someone to handle your affairs if you are not able to make decisions for yourself. It can go into effect immediately, or its activation can be deferred until you become incapacitated.
- Medical Power of Attorney: This particular Power of Attorney document grants a trusted healthcare proxy the authority to make medical decisions for you if you end up unable to do so yourself.
- Living Will: While some of the documents discussed here give other people the authority to act on your behalf, a Living Will allows you to give them instructions on what you want them to do should you become incapacitated. This might include financial and medical decisions.
- Advance Directive: An Advance Directive provides instructions to healthcare providers about your wishes if you are incapacitated. It is often an important tool in end-of-life healthcare, such as if a person does not want life-saving measures used in certain situations. It is a good document to put in place while you are young and in good health.
When new parents begin estate planning, starting with an Estate Planning Worksheet for Married People and the Estate Size and Tax Calculator for Married Couples can help new parents assess their estate planning requirements.
What estate planning tools let me appoint a guardian for my children?
You can designate a guardian to take care of your child or children in your Last Will and Testament. This document gives the person you designate the legal authority to care for your minor children after your death.
You can use a Power of Attorney to designate someone to care for your children in the event you are unable to do so because of an injury or illness. State laws often differ on how best to do this. You can prepare additional documents, as discussed below, to ensure the person you choose can provide your children with the care they require.
What legal documents can help me manage the care of my minor children?
While a Power of Attorney for Child can meet the legal requirements for appointing a guardian of your child while you are incapacitated, the guardian may benefit from specific guidance regarding some of the duties expected of them. For example, a Parenting Plan can provide the guardian with instructions on how you would like them to care for your children. A Child Care Authorization lets others know that the guardian has your permission to make decisions for your children and provide care for them. Furthermore, a Consent for Medical Treatment of a Minor empowers the guardian to make decisions affecting the children’s healthcare.
You can contribute to your children’s financial security by designating them as the primary beneficiaries of an IRA or other retirement account or plan. In the event of your death, the benefits from the account go to your children. You may be able to do the same with certain investment accounts. You can also buy life insurance policies that provide benefits to your children.
Estate planning documents can help you make arrangements for your children’s long-term needs, including financial support, healthcare, and education. An Education Cost Worksheet can help you determine how much to set aside to pay for your children’s education. You can set up an Education Trust to hold assets that can eventually be used to pay educational costs. Considering how much schools charge in tuition now, it is prudent to start saving early.
If you have a child with special needs, such as a disability or illness, you may wish to make additional arrangements to provide for their care should you become unable to care for them. A Special Needs Trust allows you to set assets aside for this purpose.
Is it necessary for me to have an Advance Directive or Living Will if I am not sick?
Every adult can benefit from the peace of mind afforded by an Advance Directive, regardless of their age or health status. An Advance Directive gives you the power to direct your medical care during a time when you are not able to communicate your wishes. You can decide what kind of treatment you would want in that situation and designate someone you trust to act on your behalf. This document provides a clear statement about what you want, which could allow your family and healthcare providers to avoid confusion and save time during a medical emergency.
State laws govern Advance Directives, so the specific terms you can include in your document depend on where you live. A Medical Power of Attorney and Living Will can sometimes part of or contain your Advance Directive or other instructions.
If you have more questions about estate planning as a new parent, reach out to a Rocket Lawyer network attorney for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.