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Estate Planning for First-Time Parents

September 17, 2021

 

Being a first-time parent can be both exciting and overwhelming!  So, it’s no wonder many new parents often overlook the importance of estate planning.

What is an estate plan?

Most young parents hardly believe they have anything of value, much less an “estate.” The truth is everyone has an estate, whether you’ve just bought a new home or have a car or even just a bank account…all of these possessions are your estate. Of course, it can also include artwork, jewelry, and even sentimental items.

You might commonly think you designate those wishes of who gets what in a will…and you’re partially right. However, there’s another step you might want to take. You may decide to have a “trust” which gives you additional options for what happens to your money (including life insurance) should you die. With a will, the money or possessions go immediately to your children once they turn 18. Yet many of us, know that 18 years old’s are rarely equipped to manage a large sum of money judiciously.

With a trust, you can put additional constraints on the money, designating it for milestones, such as education, a down payment on a house, a wedding, even travel – anything you deem as “worthy.” You also can put tiers on the money, so it is distributed in increments at various ages, rather than given as an one-time as a lump sum.

What should be part of estate planning?

Estate planning involves looking at your life holistically and carefully thinking about what you want taken care of on your child’s behalf. Here are five key things which should be part of your estate planning.

1. Create a will or trust.

The foundation of estate planning is a will or trust, so make sure you have one created. Remember, you can make changes as needed, but you want your wishes written down.

2. Name a guardian.

This can be the hardest part of estate planning, but it’s vital to make sure you have designated the person whom you want to care for your child. Choosing a guardian is a serious task, so think it through carefully, and then ask them if they are willing to assume the role.

3. Get life insurance.

Both partners should have life insurance; even if one is not working. There are multiple options and types of life insurance you could buy; some are “term” which means they only last 10 or 20 years, while “whole life” insurance policies serve as more of an investment vehicle. You’ll want to talk with a professional about what would be best for you and your financial goals.

4. Update your beneficiary forms.

You might not have considered these forms since you signed up for a 401(k) at your work, but it’s important to make sure they are updated to the beneficiary you choose. Even if your will clearly states another beneficiary, these forms supersede it, so make sure they reflect your current wishes.

5. Create a Durable Power of Attorney.

This is a document that designates whom you want to act on your behalf should you become incapacitated. You can name separate people to handle medical and financial affairs or one person to do both. You should have a backup person listed as well in case your primary contact is unable or unwilling.

Why should you tackle estate planning as a first-time parent?

The answer is simple: peace of mind. While ideally you will get to watch your child grow into adulthood, you want to ensure they are taken care of should a tragedy strike. Having ongoing money conversations with your partner is important, and as first-time parents, the most crucial one is about estate planning.

Are you ready to get peace of mind today? Contact Valley Strong Credit Union to learn more about our estate planning services.