Becoming a parent comes with a great deal of responsibilities. Most people are only concerned with plans for their child’s day to day wellbeing not realizing how vital it is to plan your estate as it goes a long way in securing your child’s future. Your estate plan might just be what will save your child if something should happen to you and your spouse. As a new parent who wants to plan your estate, there are certain steps you have to take to ensure proper planning of your estate.
Writing your will and naming a guardian for your child
A will is a legal document, it will enable you plan how your estate will be distributed among your heirs. It helps you plan ahead of your death, to make sure that your estate is properly managed. Also, you name your executor in your will. As a new parent, including a will in your estate plan will help you make provisions for your child in case something happens to you and your spouse.
First of all, your will have the details of what you want to give to your child when you die and how you want your child to go about the usage of this assets.
Also in the case of incapacitation, probably due to an accident or something of sort, it is your will that will make known whom you have chosen to look after your child if he or she is still a minor. If you die without naming a guardian for your child, the court will have to decide who will take over the care of your child and this might not be what you want.
Updating your beneficiaries
An estate plan which involves a child as an heir is definitely different from that which does not involve a child as an heir. Probably before you became a parent you had your estate planned out. Becoming a parent is a big reason for you to update your estate plan so as to make provisions for your new child in your estate.
It might be that your spouse was the sole heir to your estate or probably your spouse, parents, siblings or close relatives before the birth of your baby. This is something you want to change to avoid leaving your child out of your inheritance. So speak with an attorney today on how you can update your estate to include your child.
Buy a life insurance
Life insurance is a way of providing financial security for your child. It is a very useful tool of making cash available for your child or children. If anything should happen to you the life insurance will support the surviving spouse in bringing up the child. This will be very useful as the cost of raising a child is very high. But if something happen to you and your spouse then the life insurance will be able to cover for your child’s financial needs till they grow up and become independent fending for their selves.
Set up a trust
If anything should happen to you or your spouse or both of you before your child becomes 18 years old, your child won’t be able to claim possession of your assets immediately. The court will have to appoint someone who will be in charge till your child turns 18 years of age.
A trust is a fiducial relationship between two parties for the benefit of a third party. The first party gives legal right of ownership of his assets to the second party who is referred to as the trustee for the benefit of the third party who is the main beneficiary of the trust. With a trust;
- Your assets will be directly transferred to your child (if you name him or her as your beneficiary) at the time you specified.
- You can specify how your child should manage your assets.
- Your assets won’t have to go through the process of probate before getting to your child. With this you help your beneficiary save time and money involved in the process of probate.
- Depending on the type of trust, you will also shield your beneficiary from taxation.
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