Before you became a parent, you already thought about the many responsibilities that will surface. One of them is creating an estate plan. Now that your family is growing, you understand the importance of an estate plan and how it will protect your assets and family.
Here are some frequently asked questions that many new parents have about estate planning:
Why do I need an estate plan?
With estate plan – whether through a will or trust, you are protecting your assets as well as your family. You have put together a plan that contains your decisions as to what happens to your home, money, personal property and certain investments if you die or become physically or mentally incapacitated. With a growing family and more children possibly on the way, you must understand the importance of estate planning and naming your beneficiaries. Peace of mind is crucial. Without an estate plan, the state decides what happens to your estate.
What are some critical details that I should include in an estate plan?
Executor: In creating a will, you need to name an executor – the person who has the responsibility to settle your estate. Make sure you name a trusted, willing and available person who is on good financial standing. This person could be your spouse.
Guardian: As a new parent, you must understand the importance in naming a guardian for your minor children. Granted, you do not want to think of such a scenario in which you and your spouse have died, leaving your children. But it can happen. In naming a guardian, you also want a trusted person of family in good financial standing. This person also should share the same values as you and is willing to serve in this role.
Durable powers of attorney: Naming durable powers of attorney for health care and financial matters also is important. The person who serves as financial power of attorney presides over your legal and financial responsibilities if you are no longer able to do so. A health care power of attorney makes the decisions regarding your health care if you are no longer able to do so.
Health care directive: Also, include a health care directive or living will, which declares the type of medical treatment you will and will not accept if you are near death.
Living trust: A living trust – an alternative to a will — also is a solid estate plan option that allows you to manage your assets while still alive. Your assets now belong to the trust, and not you. As the creator of the trust, you may serve as the trustee — the person who manages the trust. You also may name another person for trustee role.
When should I update my estate plan?
Whether you have a will or trust, the general rule is to update your estate plan every three to five years. However, when major life events occur, then it is time to revisit your will. A major life event includes the birth of children, change in marital status, purchase of a home, starting a business and receiving a significant inheritance. With a new and growing family, you want to make sure your estate plan is up-to-date.
What assets are not covered by a will?
Retirement investments such as 401(k)s and IRAs along with life insurance policies fall outside the authority of a will. This is why it is so important to name beneficiaries for these investment plans.
Knowledge is important when it comes to estate planning. It will help you and your family.
Seek guidance from an attorney
As a new parent, you will have many questions about estate planning. Make sure to perform some initial research to gain a basic understanding of estate planning. Then seek legal advice. A skilled estate planning attorney will guide you.