You may be wondering why I would focus on estate planning first? According to a 2017 survey conducted by Caring.com, only 36% of adults with children under the age of 18 have a will. Which is understandable, who wants to sit around thinking about their inevitable demise?
With a child, a lot of things change financially, especially from an estate planning perspective. Prior to having children, you may have had a “sweetheart will” meaning everything would pass to your spouse or partner at your passing. Now, you have to think about what would happen to my child if something were to happen to me and my spouse or partner? Who would I want to raise him or her?
We recommend to our clients they at least put together a basic estate plan utilizing a will, financial power of attorney, healthcare power of attorney, and an advance directive or living will.
A will specifies after your passing who you would like your assets to go to. When you have a minor child, you should consider a “minor’s trust”. This is particularly important in the event of, what attorneys call, a “common disaster” – where both parents die unexpectedly at the same time. This type of trust spells out how the money is used for the benefit of your minor child and who will be in charge of it. You should also name a guardian for your child in this trust.
Healthcare or medical power of attorney is a legal document that designates someone to act as your agent for healthcare decisions if you are unable to. You do not have to be terminally ill for this document to come into effect. It is common to name a spouse for this document or a trusted person who you have previously communicated your wishes for your care.
The financial power of attorney is similar to the healthcare power of attorney but it only governs financial matters. This allows someone to manage your financial affairs and make financial decisions on your behalf such as file tax returns, pay off debts, manage investments, real estate, etc.
Finally, the living will or Advance directive gives instructions to medical professionals and loved ones about the measures you want taken in end-of-life scenarios. Would you like to be on life support or not? Would you like artificial hydration and nutrition? The goal is to help relieve the burden of decision making on your family and loved ones during end-of-life situations.
In my opinion, you owe it to your significant other to have estate planning documents in place but you also owe it to your new child. Doing the planning now will help make sure your wishes are being met for the upbringing of your child even if you aren’t there.
Please note that I am not an attorney and therefore cannot give specific legal advice. Even though there are many options on the internet to obtain legal documents, we recommend you consult with a board-certified estate planning attorney in the state you are in to help you establish an estate plan and draft all the legal documents. Establishing a relationship with a local attorney will be more than worth the costs involved especially in the long run when or if these documents are used.
In our next installment of the series, we will discuss short term disability versus FMLA for when you or your partner has the baby.
If you would like help regarding your financial plan and preparing for your new financial journey as a parent please reach out to Accruent Wealth Advisors for a complimentary consultation.