Becoming a new parent will be one of the most exciting and wonderful times of your life. Updating your estate plan is one of the most important decisions you can make to protect your child’s future. Here are several steps you can take to update your estate plan after a new baby.
• Name or change guardians – As part of your estate plan, you can specifically name a legal guardian for your child in your will if you and your spouse or the child’s other parent have both passed away. If you do not name a guardian, the state will select one for you. For a discussion of the differences between guardians and standby guardians, check out our previous blog post.
• Create a will – If you die without a will, Indiana law—not your family—decides how your property is divided. Writing a will can be easier and less expensive than you might imagine. For more information on the consequences of dying without a will, see our post, Do You Have a Will? Intestate Succession in Indiana.
• Consider establishing a trust for your minor children – If you die before your children turn 18, they cannot directly take control of any inheritance you leave them. Instead, the courts will appoint someone to manage and control your children’s inheritance. When you create a trust, you take control. Not only does a trust allow you to designate a person (trustee) to manage your children’s inheritance, it also enables you to provide instructions on how and when the inheritance is used.
• Buy, update, or increase life insurance policies – The birth of a new child is a perfect time to reevaluate your life insurance. Buying life insurance can ensure financial security for your family in the event of your death. Life insurance policies are relatively inexpensive and provide you with peace of mind knowing your child will be supported financially.
• Designate Beneficiaries for your retirement accounts – Make sure you designate beneficiaries to your retirement accounts (IRA,401(k), etc.). This can be done in a matter of minutes by submitting a simple form to your employer or retirement account provider.
• Begin planning and saving for your child’s future using a 529 plan – The cost of college is rising at a staggering rate. By contributing a small amount of money to a 529 plan now, you can ensure you have the financial resources to help your child get the education they deserve. Not to mention the federal tax advantages—the earnings in 529 plans grow tax-free and are not taxed when taken out for educational expenses. Additionally, many states offer tax credits for 529 plan contributions—for example, contributions in Indiana are eligible for a 20% state tax credit, up to a maximum of $1,000.
While having a new child will be one of the most overwhelming and stressful times of your life, it will also be the most rewarding. So, while estate planning probably isn’t your priority, having a solid plan can give you some peace of mind in an otherwise hectic time. Taking the time to update your estate plan will assure you that your new child will be taken care of.
This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.