Any time you and your spouse welcome a new child into your household, you need to update your estate plan. If this is your first-time parenting experience, you need to establish an estate plan.
Regardless of your age or the size of your bank accounts, etc., the very fact of your new parenthood makes estate planning necessary. Why? Because you have just assumed financial responsibility for a child for at least the next 18 years. If you already have an estate plan, you need to update it with the arrival of each new child.
Last Wills and Testaments
If you and your spouse do not yet have wills, now is a great time for each of you to make one. In all likelihood each of you will want to name the other, plus your child, as your heirs. Your respective wills should also name the person or persons you want to finish rearing your child in the event that both you and your spouse die together before he or she reaches adulthood.
Keep in mind that state law prohibits a child under the age of majority from owining property in his or her own name. Consequently, in addition to Last Wills and Testaments, you and your spouse may wish to establish one or more trusts for your child’s benefit. The beauty here is that the trust owns any assets you place in it. However, you can continue to manage those assets if you name yourself as trustee. Do not forget to name a successor trustee to assume those duties in the event of your death or incapacity.
If you do not believe you have sufficient assets with which to fund the trust, consider funding it with one or more of your life insurance policies. Simply name the trust as your policy’s beneficiary. This way its proceeds will automatically go into the trust without the necessity of first going through probate.