As a new parent it is unlikely that your first thoughts are creating an estate plan. An estate plan is, however, an important part of every new parent’s duties. You must make arrangement for your child’s well-being and financial care in case of your sudden death.
Choose a Guardian
Every parent with minor children should have at least a Last Will and Testament. This document allows you to name someone to take over the care of your children in the event of your untimely death. Your guardian can be anyone you wish: a married couple, a single cousin, or even your neighbor.
If you do not name someone to take custody of your children upon your death, a court of law will choose a guardian. If no one is available, then your children could end up in foster care. Planning ahead gives you time to speak with various family members and determine who is willing and able to take your children.
Get Life Insurance
If you have small children, term life insurance can provide a way for them to survive if you pass away before they reach adulthood. If you purchase term life insurance while you are young, your premiums may be much lower. Term life insurance lasts for a specified amount of time, which means you can pay for the policy just until your children reach adulthood.
Leave an Inheritance
You can also provide for your children financially by leaving an inheritance. If you use your Last Will and Testament to leave an inheritance to your children, the guardian chosen will watch over those funds until your children reach adulthood.
What if you are worried your newly adult child may mismanage inheritance funds? There are many alternatives to leaving an inheritance directly to your child. Irrevocable trusts such as a Lifetime Trusts offer many benefits including a slow distribution of funds over your child’s life. You can also create a shorter term Trust to end sometime in your child’s adulthood.