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As every new parent knows, welcoming a new child into the family can be a little overwhelming. There’s so much to learn and so much adjusting to do (often on much less sleep than you’re used to!). But in addition to learning to secure car seats and figuring out how to soothe a fretful baby, there’s something else you need to know: how to provide security for your new family through estate planning. Let’s talk about what a growing family needs to know about estate planning for new parents.
We know: life is busier than ever now, and you’re focused on this new beginning. Thinking about endings probably doesn't feel like a priority with all that’s going on. And let’s be honest: now that your child is here, it can be terrifying to even imagine a time in which you won’t be here for them. But for new parents, estate planning is an essential way to protect what matters most.
Like many other aspects of being a new parent, estate planning can feel overwhelming. Where do you start? How do you know if you’re doing it right? You probably have a lot of questions, and you may even feel like you don’t know what questions to ask.
That’s why it’s important to work with an experienced estate planning attorney. You’ve never done this before, but your attorney has worked with many families in your position. It may seem tempting, given how full your days are, to try to “DIY” your estate plan and save a little time and money. But making your estate plan is something you want to do right, and that requires the guidance and skill of an attorney who can help you identify your needs. The first thing you need to know about estate planning as a new parent? Don’t go it alone.
Every family is different and deserves an estate plan customized to their unique needs. That said, there are a few basics that every family should have. At a minimum, you should have a will that not only disposes of your assets but names a guardian for your child in the event that you and your child’s other parent are no longer here to care for them.
The vast majority of the time, a guardian named in a will is never needed. But that doesn’t mean that you should make the decision casually or lightly. Things to think about include:
Your attorney can help you weigh the various considerations in choosing a guardian, but of course, the final decision must be yours. If you do not name a guardian for your child, the court will likely appoint a close relative to serve. That may be someone you would prefer not to raise your child, so it’s best to put the work into making a choice yourself. You should also be prepared to revisit the issue in the future as both your child’s and proposed guardian’s needs and abilities change.
As mentioned above, a will is important, as it is the document in which you can name your preferred guardian for your child or children. A will also distributes your assets after your death. But while a will is necessary, it may not be sufficient to secure your child’s financial future.
There are a couple of issues in play here. First, you need to plan for there to be enough financial resources for your child to be raised to adulthood and be educated as you wish. The second issue is that a minor child is unable, legally and practically, to manage their own finances. An adult will need to manage a child’s assets and distribute funds for their care.
Most parents think about the first issue, and purchasing life insurance is an obvious way to provide financial resources for your child when you are no longer here to pay for their care and needs. But many don’t consider what will happen to the assets that are left for or to a child.
Since the child lacks the legal capacity to manage their own property, an adult must be appointed to do it. This can happen in one of two ways. The probate court can appoint a conservator to handle the child’s finances until they become a legal adult. (The conservator may, or may not be, the same person as the guardian.) When the child becomes a legal adult at eighteen, they have full control of their assets.
If you’re uncomfortable with the idea of an eighteen year old having sudden, unlimited access to an estate worth possibly hundreds of thousands of dollars, you’re not alone. That’s why we recommend the creation of a living trust for parents of minor children. A trust allows you to use and control assets during your life and appoint a successor trustee of your choosing to manage trust assets after you die or become incapacitated.
If you should die while your child is a minor, the trustee can manage trust assets for your child’s benefit without the need for a probate court appointment. Even more appealing, you can set the terms of the trust to control how assets are managed and distributed and when your child will get full access to them. For instance, you can provide that trust assets will be used to pay for your child’s education, health care, and maintenance, and that the trust will terminate when your child reaches a certain age. At that point, all assets that were in the trust will be distributed to them.
All of this can be a lot to think about, but the good news is that you don’t have to figure it out all at once, and you certainly don’t have to figure it out on your own. You just need to take one step at a time, and the first step is to contact a Minnesota estate planning attorney. Your attorney will walk you through all the other steps in a way designed to meet the needs of your new family.
The need to make an estate plan as a new parent may feel intimidating, but knowing that you’re taking action will help you sleep better at night (as soon as your baby lets you). We invite you to contact Mundahl Law to get started, or sign up to attend an estate planning workshop to learn more.