As new parents, you and your spouse have plenty of things to think about. Estate planning likely is not one of them, but it should be. Why? Because regardless of your age or the amount of wealth you possess, good parenting requires you to provide for your new child.
The whole purpose of estate planning is to protect your wealth and make sure you control its distribution during your lifetime and at your death.
Last Will and Testament
At the very least, you and your spouse each needs a Last Will and Testament. In them you specify who inherits from you, and in what proportions, when you die.
Of more importance with regard to your child, however, is the fact that your will can also state who you want to rear him or her in the event you and your spouse both die in a car crash or other catastrophic event before he or she reaches the age of majority. Remember, state law precludes children from owning property in their own right. Your will should therefore specify that the person(s) you designate as your child’s guardian(s) have the right and duty to distribute the assets for his or her benefit during his or her minority. Make sure to update your will whenever you welcome a new child into your family.
You can also establish one or more trusts as part of your estate plan. For instance, if your child has special needs, you may want to set up a special needs trust for him or her. The trust document names him or her as the beneficiary, and you can name yourself as the trustee if you wish. Keep in mind that the trust owns whatever assets you place in it, not your child personally. By naming yourself as the trustee, however, you can continue to manage the assets as you now do, spending the income the assets produce for your child’s benefit. Be sure to designate a successor trustee who will take over your duties should you become too ill, injured or otherwise incapacitated to fulfill them.