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Spiro J. Verras Blog

Thursday, September 22, 2016

Why Young Parents Need an Estate Plan

What steps do new parents need to take to protect their family?

New parents are faced with many challenges, usually including exhaustion and sleep deprivation. While adjusting to parenthood requires hard work and patience, it is also essential to think about the future. No one wants to think about death or becoming disabled when welcoming a new child into the world, but this is the perfect time to protect your family by putting an estate plan in place.

The most basic estate planning document is a will, which describes how your assets will be distributed after you die and allows you to name the personal representative who will have the job of carrying out your instructions. Of course, many new parents mistakenly believe that they don't need a will since they have not acquired significant assets. No one is too poor to need a will, a will does more than pass on your assets. In fact, a will allows you to hold whatever assets you have in trust for your children until they reach a specified age, and to name the trustee who will be in charge of those assets. Estate planning also allows you to name a guardian to care for your minor children. If you do not take steps to name the guardian or guardians of your choice, a court will choose a guardian who may not be the person you would want raising your children if something were to happen to you.

Other Ways to Protect Your Family

In addition to a will, new parents also need to create durable powers of attorney for finances and and preneed designations for healthcare. A durable power of attorney allows you to name a trusted person to manage your finances if you become ill or suffer an injury and are unable to do so. Your spouse is often the obvious first choice, but it is important to name at least one backup in the event you and your spouse are both incapacitated.

In addition a power of attorney for health care, also referred to as a designation of health care surrogate, which allows you to select someone to make decisions about the type of medical treatment you should receive if you become incapacitated. That document will again likely name your spouse as a first choice, but a backup health care surrogate is critical if something were to happen to both of you. While death and incapacity are, and should be, the last thing on your mind when you're looking into the eyes of your child, these highly unlikely worst-case scenarios need to be considered to make sure your family is protected.

Another step that that can help protecting your loved ones is to look into life insurance, which can replace lost income in the event you die prematurely. Generally, it is helpful to designate beneficiaries on any retirement accounts such as IRAs and 401(k)s so that these funds can be passed on without being probated. However, if you have minor children, you should discuss with your attorney whether or not you should designate them as beneficiaries on your accounts. If a minor inherits directly, the result can be the appointment of guardian ad litem to protect their interests until they reach 18. On the other hand, using your estate plan you can avoid this court proceeding by designating a trustee to manage your child's funds until whatever age you deem appropriate.

The Takeaway

Having children is a life-changing experience, and one that requires planning for the future. By putting a well designed estate plan in place, you can protect your assets and provide for your loved ones. The best way to achieve these objectives is by engaging the services of experienced estate planning attorney.


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