Your little bundle of joy has finally arrived. You’re a parent. You’re officially on a roller coaster ride of stress and sleepless nights that will only continue to morph into more stress of varying kinds.
The list of things that need to be done is endless and estate planning probably hasn’t come close to the top, if you’ve given it any thought at all. But, it should be a priority.
I have seen far too many instances where insufficient estate planning has resulted in unfortunate consequences to surviving loved ones.
Sure, you may not have much in the way of assets, but the number one priority in estate planning at this juncture in your life is your child. If something were to happen to you and your spouse, your child would need to have a guardian. And, if you haven’t specified one, the court will make that decision (and, unfortunately, sometime while that decision is pending, your child may be in the care of child protective services). In addition, if you leave a surviving spouse, some states default part of your estate to go to your child when realistically you would rather have it go to your spouse to be used for the care of your child.
There are a multitude of reasons why estate planning is important that are too lengthy for this post, so let’s go over the basics.
1. Life Insurance
– You’ll want to have a policy that covers several years of wages. A lot of employers offer small life insurance plans, but you may want to supplement that with an additional plan. It is quick access to cash for funeral expenses and covers any leave your spouse takes from their employment.
– A lot of new parents are young and healthy, so sometimes term life insurance is a good idea. It is a type of policy that only stays in effect for a specific term (hence, the name) and is usually less expensive. (Once you get older, it becomes more expensive since your life expectancy is shorter.).
2. Your Will
– The primary purpose of writing a will for a young parent with a small estate is to name a guardian for your child. This can be a tough decision and you’ll want to make sure that the person can financially and physically support caring for a child. Once you have someone in mind, you need to discuss it with that person to make sure they are okay with it. In addition to naming one guardian, you may want to name secondary and tertiary guardians in case something happens to the first.
– Name an executor. Pick someone responsible who you trust. This is the person that will be responsible for carrying out your wishes as detailed by the trust. This could involve court hearings and even paying debts and taxes.
3. Living Will (Sometimes called Advance Directive)
– This document lets family members know what your wishes are for end-of-life care. Not only does this allow you to make the decision, but also you take the burden off the family members from making, what sometimes seems like, an impossible decision.
4. Power of Attorney for Healthcare (or Healthcare Proxy)
– Similar to an executor for a will, and POAH ensures that the instructions in your living will are followed and will make any decisions not otherwise covered in the living will.
5. Power of Attorney
– It is helpful to have POA paperwork for finances as well in case of death or disability. What if your spouse needed access to your accounts right away? If named as POA, they would not have to wait to inherit before being able to access them.
6. ALWAYS NAME BENEFICIARIES ON ACCOUNTS
– You can’t imagine the amount of times I have seen accounts with no beneficiaries listed. It is important to make sure beneficiaries are named even if you have a will. Naming a beneficiary bypasses the probate process.
– Make sure that the beneficiaries named fits with your overall estate plan, though. Because, regardless of what you have in the will, the beneficiary designation will override that.
– And, review regularly. Sometimes, things change.
– Last, but not least, it’s important for your spouse to know what’s out there even if you don’t share accounts. It makes finding and accessing them in the event of your death that much easier. My husband and I chose to continue to keep our bank and investment accounts separate after marriage. It was much easier and we both like the independence (We have a shared budget to stay transparent on spending and income. But, even so, he knows where I have accounts in case he needed to make the call).
These things do not have to be fancy by any means. You can do most of them on your own with the myriad of online resources available. If you don’t feel comfortable or have a complicated estate, hire an attorney. This is by no means an exhaustive list in some cases. But, it is a good place to start. And, once you have your estate taken care of you’ll breathe a little easier knowing that your family is taken care of in the future.
And, you can go back to stressing about the other hundred things that are asking for your attention.