We've all been told to expect the unexpected. And as hard as it is to contemplate what might happen to our loved ones when we're no longer here, it is necessary to do so - especially for new parents. Having children is a "triggering event" when it comes to estate planning. If someone doesn't have a will already, they should create one when a new child enters their lives.
For parents with young children, estate planning focuses more on the care of their children than the distribution of assets or managing estate taxes. To accomplish this, a young parent's estate plan emphasizes choosing the right person to fill two crucial roles: their child's guardian, and their financial trustee.
Choosing a guardian for minor children
Without a plan to the contrary, the courts will select a guardian for the children - often a family member. For some families, this doesn't present any issues. However, there are plenty of situations where parents do not wish to have certain family members take custody of their children. Or they might have a close friend who has a special relationship with the children, and who might make a better guardian.
Appointing a trustee for financial security
While a guardian takes physical custody of a child when their parents are no longer around, a trustee safeguards the child's financial assets. The trustee generally takes care of tax returns, bills, savings, and investments until the child is at least 18. In some cases, the trustee remains in control of the child's finances until they reach a greater age their parents have designated - for example, an age when the parents predict the child will be responsible enough not to squander their inheritance.
Do I have to designate both a guardian and a trustee?
Parents can choose to have the same person act as both guardian and trustee, or they can split these responsibilities between two people.
Estate planning for new parents also includes some of the more typical estate issues: naming a personal representative, setting up a trust, and more. An estate planning attorney can help you address all of these issues in a way that gives you peace of mind and safeguards your child's future.