New Parents and Estate Planning
From our “Ask a Question” Mailbag: “My wife and I just had a baby, and we realized we have no wills or other documents. I guess it is time to grow up! Can you tell me more about New parents and Estate Planning? What do we need?”
New Parents and Estate Planning.
So many changes come with a new baby—lifestyle changes, baby-proofing the home, and estate planning. Planning between a married couple is simpler than planning to care for an infant. There are many more issues to address and decisions to make. But we have been doing this for a long time; let us help make it easy. Then you can go back to trying to get some extra sleep.
Documents You Need.
Everyone can use a Will, Power of Attorney, and Living Will. However, you must address some additional issues when you have a child. Guardianship is one; if you should both die, or if you are both incapacitated—a trust to hold the baby’s inheritance until the child is old enough to manage money independently. There are also complications with IRAs and 401 (k)s. These are complex issues. We will explain and address these issues during our meetings, but here is a general outline to get you started.
A Will With Trust:
Your Will now must create a trust to hold assets for your child if you both should die. This trust needs a Trustee, a person you “trust” to manage these assets and pay your child’s bills. Furthermore, the Will appoints a Guardian. The Guardian is the person who will assume the legal role of parent and raise your child. The Trustee and Guardian might be the same person, but it is not required. During our meetings, we will discuss the pros and cons of dividing these jobs.
Temporary Guardianship:
In your Will, you appoint a person to take over as Guardian for your child if both parents should die. But, what if instead you are in an accident and incapacitated, but not dead? The Will only has power if you have died. So, if you are incapacitated, no one has the authority to care for your child. This is precisely the circumstance that the Temporary Guardianship addresses. You are in the ER, unable to care for the child, and this document gives someone the authority to pick up your child from the hospital, school, or police station and take them home. Further, it authorizes this person to make emergency medical decisions for your child.
IRA Trust:
If you have any IRA or qualified plan (401k, 403b, etc.), you have named a beneficiary for this plan at your death. If you name a minor child as a beneficiary, it can be a disaster. Remember, your baby is the beneficiary ONLY if you have both died. This means the child is an orphan. No one can legally sign documents for your child, whom you have made the beneficiary. Now, we must go to court and spend time and money. Instead, you can set up an IRA Trust. You name this trust as the beneficiary, not the minor child. The trustee then collects the IRA/401k, fills out the paperwork, and has control in as little as a week after your death. The courts and all the expenses are avoided.
If you want to know more, please read my article, Estate Planning When You Have Children: Everything You Need to Know.
In Conclusion, New Parents and Estate Planning, It is Important!
I hope you found this short article about New Parents and Estate Planning. Contact us if you want to know more or have an estate that needs our help. Let our Probate and Estate Planning lawyers help walk you through what can be a confusing process. Feel free to contact our office for a free consultation. It’s All We Do:
Wills, Trusts, Probate, and Estate Litigation!
It’s What We Do!
Peter Klenk, Esq. Pennsylvania Revocable Trust Lawyer, New Jersey Revocable Trust Attorney
