When your family welcomes a new child into your home, you want to offer them the protection they need. You may change your cupboard hardware or add baby gates to keep them from danger. You may cover outlets to protect curious fingers. However, many new families miss an important step toward protecting their new child: creating or updating their estate plan.
What steps should new parents take to protect their child through their estate plan?
1. Update your beneficiaries.
If you have already created an estate plan, the birth of your child is an important time to review that plan and ensure that it still fits your growing family. Adding your child to the listed beneficiaries is one important way to ensure that they have the financial support they need. You should also review the listed beneficiaries for your life insurance policy and other important documents.
2. Name a guardian for your child.
Who do you trust to care for your child when you cannot? If you have not created an estate plan, the person you trust most might not be the person that will raise your child if the worst should happen. Naming a guardian in your will allows you to make that decision rather than leaving it to the courts.
3. Consider establishing a trust.
Just as naming a guardian for your child allows you to choose someone you trust to care for them, establishing a trust allows you to choose a trustworthy person to manage their inheritance. This can ensure that their money is responsibly cared for until they are old enough to manage those funds themselves. A trust also allows you the opportunity to outline additional guidelines like requiring funds to be used for a college education.
4. Establish power of attorney.
Your estate plan should also include considerations for cases where illness or an accident leaves you unable to make decisions. A power of attorney allows another person to manage your finances and make major health decisions on your behalf, ensuring that those details are addressed and your child receives the support they need.
A carefully thought-out estate plan can be an important step in protecting your child today and for years to come.