Becoming a new parent is an exciting time. It\u2019s incredible how your world changes almost overnight, though sometimes those changes can feel overwhelming. For many people, this is the first time that the importance of estate planning hits home. If you\u2019re in that group, don\u2019t worry\u2014crafting an estate plan that ensures your child is properly cared for isn\u2019t as hard as you think. Here are ten simple steps you can take to put a comprehensive plan in place:<\/p>\n
If you become incapacitated\u2014perhaps due to a serious illness or accident\u2014you\u2019ll need someone to manage your finances and ensure your child is provided for. If you\u2019re married, your spouse already has the legal authority to that. If you\u2019re not married, or if your spouse also becomes incapacitated, you\u2019ll need to appoint an authorized agent<\/a> to handle your affairs. Draft a durable power of attorney<\/a> that names the intended party as your attorney-in-fact. With this document in hand, your agent will be able to work with your financial institutions to pay your bills, manage your investments, and spend money to care for you and your child.<\/p>\n On a similar note, you\u2019ll also need someone to handle your medical needs if you become incapacitated. A healthcare proxy will have the authority to access your medical records, speak with your doctors, and make important decisions regarding your treatment if you\u2019re unable to communicate. Again, your spouse inherently has this authority, but other family members and friends do not. Most people designate the same person to serve as agent and healthcare proxy with a single power of attorney, but you can draft separate documents if you\u2019d like to differentiate between the two.<\/p>\n An advance healthcare directive<\/a> (sometimes referred to as a living will) clearly expresses your preferences for medical treatment. If you\u2019re incapacitated and unable to communicate with your doctors, the hospital and your healthcare proxy will be able to consult this document to determine what you would or would not approve of. You can broadly authorize any actions to save and sustain your life, or you can specify certain treatments and procedures. Some commonly addressed topics include palliative care, resuscitation, artificial life support, cancer treatment, and surgery.<\/p>\n If your financial situation permits, it\u2019s best to purchase pre-need services from a cemetery or crematorium, such as a burial plot, headstone, coffin, etc. If that\u2019s not possible, or if you\u2019d simply prefer not to dwell on such a morbid subject, that\u2019s okay\u2014you can leave a letter of instruction with a trusted family member so that your family knows your funeral and burial preferences when you pass away. A letter of intent is not a binding legal document, but it\u2019s helpful for your family when the time comes. In the letter, be sure to note which assets should be used to pay for your services (e.g. life insurance policy, savings account, etc.).<\/p>\n You can name a guardian<\/a> for your child in your last will and testament<\/a>. The nominated individual has the right to decline, so be sure to discuss your intentions with the guardian ahead of time to ensure they\u2019re willing to care for your child. To prepare for unexpected contingencies, it\u2019s a good idea to name a backup guardian, too. This individual can take responsibility if your first choice is unable to care for your child.<\/p>\n Again, a letter of intent is not a binding legal document, but they\u2019re immensely helpful to your family and friends, and most courts will respect your intentions that are expressed in a letter of intent. In this case, you should leave a letter of intent with your child\u2019s guardian that gives them permission to take in your child until the court formally appoints them as guardian. It can take weeks before the court appoints the guardian, and you don\u2019t want your children stuck in the care of the state when there are family members and friends willing to care for them in the interim.<\/p>\n An executor or personal representative<\/a> is the individual who will handle your estate when you pass away. They will be tasked with gathering your assets, settling your liabilities, transferring your assets, and ultimately closing your estate. You can name an executor in your will, and it\u2019s a good idea to list a backup executor, too. If you fail to do this, the court will appoint a third-party special administrator<\/a> to serve as your personal representative.<\/p>\n When you\u2019re considering who will receive your assets when you die, it\u2019s important to note that some assets can automatically transfer to your beneficiaries when you die, while others will need to pass through probate court. Assets that don\u2019t require probate have a contractual beneficiary listed on the account, so the financial institution can release the assets to the beneficiary as soon as they receive a copy of your death certificate. For these assets, all you need to do is ensure the right beneficiary is listed on the account. Such assets include:<\/p>\n On the other hand, there are a handful of assets that will need probate court to transfer ownership to a beneficiary. These assets need to be addressed in your will. If you fail to cover any probate-assets in your will, they\u2019ll be subject to the state\u2019s intestacy<\/a> laws, and will pass to your lawful heirs accordingly. Considering this, it\u2019s usually a good idea to include a \u201ccatch-all\u201d clause in your will that broadly addresses any assets that may be unintentionally left out. Assets that are subject to probate include:<\/p>\n Minors can\u2019t own or receive property, so you\u2019ll need to be careful with how you disposition your assets that are intended for your child. Depending on your situation, you may want to consider establishing a trust for your child\u2019s benefit. With a trust, you can appoint a trustee<\/a> to prudently manage the assets and use them to provide for your child (the beneficiary). When your child turns 18, the trustee can dissolve the trust and gift your child all of the remaining assets.<\/p>\n If you\u2019re concerned that you don\u2019t have enough assets to sufficiently provide for your child\u2019s needs in your absence, you may want to consider purchasing a life insurance policy to bridge the gap. If you do, pay careful attention to who you list as the policy\u2019s beneficiary. Again, minors can\u2019t own property, so you can\u2019t directly transfer the life insurance death benefit to them when you die. Instead, you\u2019ll want to direct the proceeds to a surviving spouse, the child\u2019s guardian, or a trust.<\/p>\nAppoint a Healthcare Proxy<\/h2>\n
Create an Advance Healthcare Directive<\/h2>\n
Plan for Your Funeral and Burial<\/h2>\n
Name a Guardian for Your Child<\/h2>\n
Leave a Letter of Intent with the Intended Guardian<\/h2>\n
Nominate an Executor<\/h2>\n
Designate Beneficiaries for Your Assets<\/h2>\n
\n
\n
Establish a Trust<\/h2>\n
Consider Life Insurance<\/h2>\n