Few joys in life match that of being a new parent. The moment your child is born, a tectonic shift takes place which makes even the most easygoing person lose sleep over their child’s future. The sense of optimism and hope parents feel when holding a newborn is counterbalanced with the heavy weight of responsibility. As an estate planning attorney and a relatively new parent, I wanted to share my thoughts on three estate planning steps parents should consider to prudently care for the miraculous little souls entrusted to us by G-d.
Step 1: Make sure your beneficiary designations are current
Do you have a checking account? What about a savings account? A retirement account such as an IRA, TSP, 403(b), or 401k from work? Life insurance? A brokerage account perhaps? Most of us have at least one of the aforementioned accounts and possibly other types of financial accounts which allow us to list a beneficiary to inherit the account when we pass away. As we discussed in a previous article, listing beneficiaries is one way to quickly and easily avoid probate and get money to your loved ones as efficiently as possible. For most new parents, it makes sense to list their spouse as their primary beneficiary so that the surviving parent can inherit and manage the money. In situations where a parent passes away with minor children without leaving a beneficiary, the surviving parent has to go through the probate process (if there is a will) or estate administration (if there is no will) just to get access to the funds. Both processes take time and money. Even worse, if there is no will (called dying intestate), the minor children become entitled to approximately 50% of the funds in the account and the surviving parent has to be appointed their guardian of the property just to be able to access the money and hold it for them until they turn 18. Unfortunately, many people have outdated or missing beneficiary designations, making this an important first financial step as a new parent.
Step 2: Make a Last Will/Appoint guardians for your minor children
This one is tough. One of my biggest fears is not being alive one day to watch my daughter grow up, so it isn’t easy for me to personally grapple with who should be in charge of her if my wife and I aren’t around. Nevertheless, without putting their wishes in writing, parents aren’t doing their child (or the judge who appoints their guardian) any favors. In order to act in the child’s best interest, courts want to know who the parents prefer to care for the child (both personally and financially). Without having guidance from the parents, courts are missing vital information to help them make a decision, hence why it is imperative that each parent with minor children appoint a guardian for their care in the event that both parents pass away.
I put making a will and appointing guardians for minor children in the same category since a last will and testament is where most people appoint guardians for their children. However, another important reason for having a will is to distribute assets in your name which did not allow for beneficiary designations, or were missing them, to the surviving parent, similar to what was discussed in Step 1 above.
Step 3: Buy life insurance
Even though I don’t sell life insurance and am in no way an expert, I strongly urge all young parents to purchase life insurance. It’s easy enough to do so and there are plenty of websites like discountlifecover.co.uk making the process very easy. The reason is simple: kids are expensive and your surviving spouse may not have the ability to afford tuition, a mortgage, health insurance, food, and the myriad other expenses if your income was lost. Of course there is always charity, but the last place I want to see young parents is on a GoFundMe page to help pay their bills. That is what life insurance is for. Every working spouse owes it to their partner to protect them from poverty if they suddenly pass away. Every parent owes it to their children to make sure that their basic needs are met without shame or embarrassment.
With great joy comes great responsibility, and I believe these three steps are foundational on the journey of a lifetime.
Roman Aminov, Esq. is a estate planning and probate lawyer. Call 347-766-2685 for a free phone consultation.