When you have a newborn, you plan carefully for life with them. This could include searching for the best daycare, determining a primary care doctor or setting up a savings account. But you shouldn’t stop at planning for their life with you – you should also prepare for their life without you.
It’s important to develop a strategy for how things will play out if you were to pass away. You can determine your child’s inheritance, guardianship and more through an estate plan. Here are four steps for estate planning with your child in mind.
Step 1: Make a will.
If you don’t already have a will, now is the time to create one. In it, you can designate which assets will go to your child. It’s important to have this in writing, so there’s no confusion after you pass away. You can always make changes to your will at any time.
Step 2: Name a guardian.
In your will, you should also name a guardian. This should be someone who will respect your values and wishes. Remember to discuss the guardianship in-depth with this person before adding them to your will. Make sure that they are financially, emotionally and physically ready to raise your child.
Step 3: Update your beneficiaries.
You may have certain accounts with a designated beneficiary – perhaps an individual retirement account or 401 (k). And if you have life insurance, that policy names a beneficiary to receive your death benefit. You may now want to update these to include your child as a beneficiary.
Step 4: Consider a trust.
If you pass away while your child is under 18, they cannot immediately access the assets you leave them. The court might assign someone to manage your assets in the meantime, and your child could inherit everything at once when they turn 18. Creating a trust gives you more control. You can appoint the person who will manage your belongings, and determine when your child will receive certain assets.
Having a baby changes many aspects of your life. Suddenly, ensuring your child has the brightest future possible becomes a top priority. One way you can plan for that bright future is by incorporating your child into your estate plan.