Welcoming a child is one of life’s greatest joys and greatest responsibilities. Amid the sleepless nights and endless demands on your time, estate planning may not be at the top of your immediate to-do list after bringing home a baby. However, taking the time to put a plan in place is an essential step to ensure your child is protected and cared for, no matter what the future holds.
Key Documents Every Parent Should Have
- Will and/or Trust: Regardless of how wealthy you are, a Will is needed to:
- Nominate a legal guardian and a conservator for your minor children.
- Specify who will receive your assets rather than leaving distribution up to state law.
- Name a personal representative to settle your affairs.
In addition to a will, many parents choose to create trusts, even when their assets are not complex, to better control how and when distributions are made to their children in the future.
While an 18-year-old is legally an adult, most parents prefer that their children be older and more mature before inheriting significant funds without oversight. Holding assets in a trust allows children to access the funds for meaningful needs such as education, starting a business, or purchasing a home. At the same time, a trustee oversees investments and distributions. This structure prevents a child from quickly exhausting an inheritance and helps ensure that trust assets are managed wisely and used for long-term benefit.
- Beneficiary Designations: Retirement accounts, life insurance policies, and some bank accounts pass directly to the individuals named as beneficiaries and are not governed by your will. Keeping these designations current is a simple but critical planning step.
- Financial Power of Attorney: Authorizes a person you trust to pay your bills and handle financial matters if you cannot. Often, spouses serve as each other’s agents under a financial power of attorney, and each names an additional person to act as a successor agent if both are incapacitated or unable to act.
- Patient Advocate Designation and Living Will: Allows you to appoint someone to make medical decisions on your behalf if needed. As with the financial power of attorney, spouses often serve as each other’s patient advocate and name a successor in case both are unable to act. The living will also states your preferences regarding end-of-life care, alleviating uncertainty and emotional burden for your loved ones.
- HIPAA Medical Authorization: Gives healthcare providers permission to share medical information with the person you have designated to make medical decisions for you when you cannot.
Naming a Guardian and a Conservator in Your Will
One of the most important and difficult decisions you will make is choosing who would care for your child if neither parent could. There are two roles to consider:
- Guardian: The person who has physical custody of your child and makes day-to-day parenting and care decisions.
- Conservator: The person who manages money and property for your child until they are old enough to handle it independently.
Consider naming separate individuals for these roles. Doing so can take advantage of their respective strengths and create a system of checks and balances. It can also keep both sides of the family involved. For example, a caregiver might come from one parent’s family, and someone with strong financial skills might come from the other.
Choosing the Right People to Care for Your Child
When choosing a guardian and conservator, ask yourself:
- Who shares your values and parenting style and has the emotional maturity to raise your child?
- Who is healthy, financially stable, and likely to live until your child reaches adulthood?
- Who has the lifestyle and capacity to care for your child?
- How significant would a move or lifestyle change be for your child?
- Who is financially responsible and capable of managing funds wisely?
- Will your chosen guardian and conservator work well together?
- Is there anyone you would not want to raise your child under any circumstances?
Keep in mind that your choice of guardian before your child’s birth may differ from your choice after. To avoid awkward conversations, you can name your preferred guardian in your will but wait to ask them to serve until after your child’s birth. If you change your mind or your first choice declines, you can easily amend your will.
Keeping Your Planning Documents Updated
Review and update your planning documents every three to five years, or after significant life changes for you or your named guardian or conservator. Revisit your guardian choice as your child grows.
Creating Your Estate Plan
For new parents, having a clear estate plan in place provides peace of mind and is one of the greatest gifts you can give your family. Contact your Varnum estate planning attorney or a member of our Estate Planning Practice Team to discuss your plans and put them into action.
