Your new baby is home and healthy. You are finally sleeping normally and enjoying your little bundle of joy. Now that you are thinking clearly again, it is a great time to get a quick and easy estate plan together... just in case. Here are the six steps to remember when you prepare your first... Last Will and Testament.
First, lets take a look at the seven areas of documents you should eventually consider as part of your overall estate plans. These include:
1. Last Will and Testament,
2. Power of Attorney,
3. Health Care Directive or Proxy,
4. Personal Instructions to Family,
5. Designated Beneficiary Plans,
6. Living or Testamentary Trusts and
7. Lifetime Gifting Programs.
The Last Will and Testament, is the first and a relatively inexpensive starting point that all new parents should consider. Plenty of careful thought should be added to each of the six steps below. But remember that you can always change your mind, so it is better to have something now than it is to have nothing in place in the event a problem arises.
Six Steps For New Parents
Step 1 - Personal Guardianship: As a new parent, you need to think about whom you and your spouse would like to take care of your child(ren) in the event that something happens to both of you. This care can be broken down into personal care and financial care. While both of these situations could be handled by the same person, it is often best to separate them. Some individuals that are very nurturing and family oriented, may not have the time or aptitude to handle the financial side.
Step 2 - Financial Guardianship: It is often easier and more effective to appoint someone else to specifically handle the financial aspects of your estate and guardianship for your children. You may have a relative or friend that is really organized and great with numbers, but not really into children or raising a family. They may be a perfect choice for the financial guardianship role in the event something happens.
Step 3 - Executors/Personal Representatives: An executor is the person or persons that will handle the administration of your estate. Someone that is organized, good with numbers and familiar with your family is usually a good choice. They will need to organize, process and distribute insurance proceeds, pension benefits, 401K's, IRA's, social security survivor benefits as well as property assets, mortgages and other liabilities. This person may also be a good candidate for financial guardianship as previously mentioned.
Step 4 - Beneficiary Designations: Many specific investment vehicles, including IRA's, pensions and life insurance have their own beneficiary designation plans attached, but for things like savings, brokerage accounts, real estate and other personal property, you need to plan for the distribution of these assets by making appropriate provisions through your Will.
Step 5 - Omissions: Hopefully this will not be part of your situation, but if you have any individuals or children that you are specifically omitting from your will, you should provide a summary of who and why you desire their omission. This could be an ex-spouse or children from a previous marriage, children with special needs or several other situations that could arise. If you believe that any of these are applicable, you should seek expert advise before finalizing your plan.
Step 6 - Witnesses and Updating: Making sure that you have selected proper witnesses is a vital part of your Last Will execution process. No one that is a minor or named as a beneficiary, executor or guardian should be used as a witness as this could create a possible conflict of interest and may be a problem down the road. You should also make a habit of regularly reviewing and updating your estate plans, especially in the event of any of the following events. Births, deaths, disability, marriages, inheritances or job changes can all be a trigger that it is time to see if your existing plans still meet your needs.
In Summary: While having and raising a new baby is one of the most exciting adventures you will ever have, it also creates the need for some additional short and long-range financial and estate planning. Unfortunately, many young families never take these steps and then the state decides who will care for your children, take care of your financial affairs and even who is legally entitled to receive your assets.
If you take a proactive approach and spend a little time getting your Last Will and Testament drafted, you can control each of these situations. You will make sure that your children are cared for in the way you want, by the person you want and that your financial affairs will be handled by someone you choose. This will usually make everything go smoother, reduce headaches and save thousands of dollars for your survivors.
Keith Maderer is a financial expert, author, speaker and father of five. He has been a financial adviser in the Western New York for over 30 years. He is the owner of SENIOR Financial and Tax Associates and founder of the Maderer Foundation, a private scholarship program for area youth.
If you would like to discover additional financial, estate, income tax or wealth building strategies, you can check out his blog or download your FREE Wealth Expansion Kit by visiting http://www.SFTAweb.com
He is the author of "How To Get Your College Education For Less", available on Amazon.com - ISBN No: 978-1-4538-2053-7. He also offers a FREE College Cost Savings Kit which can be downloaded at http://www.CollegeEducationForLess.com