Now that your little bundle of joy is here, it is time to talk estate planning. Just like how you checked finding a pediatrician and decorating the nursery off your to do list, now is also the time to make sure everything is in place in case anything ever happened to you and your partner.
A will is one of the most important documents you will create after the birth of a child. This document not only specifies how your assets are to be divided, but it should also list who your child’s guardian is. This is a matter not to be taken lightly, as a guardian is someone who will raise your child if something were to happen to you.
While some parents choose a brother or sister to act as their child’s guardian, others choose a close friend or other family member. No matter who you choose, since it is such a large and life-changing responsibility, make sure you talk to this person beforehand and make sure they are up to the task before finalizing documents with your attorney.
Leaving assets for a child
Daycare, education, extracurricular activities – these all cost money. Then, there are the day-to-day expenses, such as groceries and making sure there is a roof – with enough room – over your child’s head.
If something were to happen to you, would your child’s named guardian have the financial means to raise your son or daughter? Even if the guardian is financially secure, you may still want to have money set aside in a trust specifically for your guardian to use for child-related costs.
There are numerous benefits to creating a trust – for your child now and into the future — including:
- Stability: A guardian will typically use trust money for costs associated with your child’s health, education and general upbringing until the age of 18. Setting this money aside can give both you and the named guardian piece of mind. The guardian can be the trustee overseeing the assets, or you can name another person as the trustee.
- Control: Receiving a large sum of money at a young age can lead to unwise decision making. This is why many parents set trust stipulations. For example, you can make it a stipulation that your child graduate from high school before receiving money from a trust. Or, you can set up increment payouts over a period of time, like at age 25, 30 and 35 – for example. This way, your adult child is not receiving a large sum of money all at once.
With estate planning and trusts, there is no one-size-fits-all and you could have multiple trusts. What you decide is entirely dependent on your family’s financial situation and what you want for your children after you pass. What is important though is that you have plans in place. None of us knows what the future holds and it is best to have something together – and not need it – then to not have anything together at all. Estate plans can always be updated as your life circumstances change.