Find out what you need to know about estate planning for new parents and young families.
Young people often put off estate planning because they don’t see the need to prioritize it while they are young and healthy. Not to mention, if you’re a new parent, the cost and time associated with estate planning may feel overwhelming with a newborn in the house.
However, estate planning for young families plays an important role in ensuring that the rest of the family is taken care of if a parent were to pass away. The legal documents you prepare throughout the estate planning process will clearly outline what happens to your young children and assets, allowing you to protect your loved ones when you’re gone.
Let’s dive into why estate planning is so important and what you need to consider and put into place to protect your family in the unfortunate event that one parent passes away. (While this is not legal advice, it will give you an idea of what you need to think about before you reach out to a law firm.)
Why young families need to think about estate planning now
It’s never too early to start estate planning for young parents. While it may feel like it’s reserved for wealthy and retired individuals, it’s actually an important process for every person to go through.
It’s especially important for young families and parents because if there is no estate plan in place, things get a bit more complicated in the event of the parents’ untimely death. If there is no surviving spouse, the courts will decide who will take care of your children. This is often the closest living family member, but that doesn’t always make it the best choice for you.
The courts will also decide what happens to your assets, which means they may not go to who you had intended to give them. Without estate planning documents prepared by an attorney, you cannot guarantee that your assets go to the person you’d like.
Estate planning for young families: 3 questions to consider
While no one wants to think about what happens after they pass away, young families need to consider what they’d like to happen. Here are 3 questions that young people should consider for estate planning:
Who will take care of my minor children?
If something happens to one parent, the other parent will likely continue to raise the children. However, if you have minor children, you will still need to make a plan for what will happen to them in the event you pass away and there is no surviving parent. Though it’s a difficult thing to think about and an even more difficult decision to make, it’s an important one.
You don’t want to leave this up to the courts. The court doesn’t know what your wishes are. They also don’t know your children or family members. This means that your children could end up in the care of someone who is not the best fit to be their guardian. When you name guardians for your minor children in your estate plan, you get to decide who is the best fit for the role.
Who will manage my assets?
Another factor you’ll want to consider before you begin estate planning is who will manage your assets after you pass away. When choosing an executor for your estate, pick someone who is trustworthy and responsible—someone you know will do what needs to be done and respect your wishes.
If you do not appoint someone as an executor, someone (usually a spouse, family member, or close friend) may come forward and petition the court to become the administrator of your estate. And if no one comes forward, the court may ask another party to serve as administrator. It’s likely that you don’t want to leave this up to chance, so make sure you name an executor.
Who will make medical and financial decisions if I become unable?
Who do you trust to make medical and financial decisions for you in the event you become unable? While this may not be something you want to think about, it’s a very important decision you will need to make as part of the estate planning process.
You can choose two different people or the same person as long as you trust them to make financial and medical decisions on your behalf when you cannot.
If you do not choose durable powers of attorney for health care and finances, then your loved ones may need to find a court-appointed person to manage your assets and a court-appointed healthcare agent, surrogate, or proxy to make healthcare decisions for you.
Estate planning checklist for new parents
As you begin the estate planning process, you can use this checklist to make sure you have taken all the steps necessary to create an estate plan.
Create a last will and testament.
Your last will and testament is the foundation of your estate plan. This legal document communicates your final wishes in the event of your death. This covers who will inherit which assets, whether it be an individual, group, or charity.
Creating a last will and testament gives you some control over what happens to your assets when you’re gone. For young families, creating a will is less about who to leave their possessions to and more about naming a guardian for their children.
It's also important to make a plan for your digital legacy
. A digital legacy refers to our ever-growing collection of personal digital assets, like social media accounts, online portals, cloud storage, and so on. In the event of your untimely passing, you'll want to have a plan in place for how these assets are handled.
Designate a guardian for your children.
You will designate a guardian for your children as a part of drafting your last will. Guardians can be your parents, siblings, aunts or uncles, or even a close friend.
The person you choose as a guardian will have an impact on how your children are raised and educated, so keep this in mind when you make the choice. In general, you’ll want to choose someone whose values align with yours and who you know would provide the best life for your child.
Before you visit an estate planning attorney to draw up the legal paperwork, you should discuss your decision with the individual(s) you’ve chosen to be your child’s guardian. Make sure they are willing to serve as a guardian before you make it official.
Create a durable power of attorney for healthcare.
A durable power of attorney for healthcare authorizes a person to make medical decisions on your behalf in the event that you can no longer make these decisions for yourself. Having this document in place will help avoid any confusion, disagreements, or uncertainty that your family members may have around your healthcare.
If a power of attorney is durable, this means that it remains in effect should you become disabled or incapacitated through illness or accident. Whereas a power of attorney stops being effective if you become disabled. That’s why it’s essential to have a durable power of attorney, especially for healthcare decisions.
Create a durable power of attorney for finances.
Regardless of your current financial situation, you will still want to create a durable power of attorney for finances as well. This person will make financial decisions and manage assets for you in the event that you are not able to do it yourself.
Your durable power of attorney should be someone who is trustworthy, responsible, and honest. Often, this is a spouse, parent, or sibling who knows you well and has your best interests in mind. This can benefit your family in the event you’re unable to manage your assets. For example, your spouse may need to get access to your checking account to pay bills in your absence.
Name an executor for your estate.
While a power of attorney for finances manages assets while you are alive, the executor of your estate will manage assets after your death. Often, this is the same person, but it does not have to be. Typically, you would choose a spouse, family member, or trusted friend who is responsible and trustworthy. You can also appoint alternatives should the initial executor not act on your behalf for some reason.
The executor of your estate is responsible for probating your will (or establishing its validity), collecting your assets, paying your debts, and settling your estate by ensuring beneficiaries get the assets you’ve left for them. This is an important responsibility that requires some work on the part of the personal representative, so think carefully about who you entrust with this role.
Create an advanced directive or living will.
Your living will, or advanced directive, will lay out your wishes for end-of-life care. A living will is different from your last will and testament as it pertains just to your medical treatment during circumstances when you cannot express your own wishes or give consent.
This document can be very specific or more general. It tends to include decisions regarding:
- Resuscitation by cardiopulmonary resuscitation (CPR) or a device that stimulates the heart electronically
- Mechanical ventilation to take over your breathing when you are no longer able to breathe on your own
- Tube feeding, which supplies nutrients and fluids to the body intravenously or via a stomach tube
- Dialysis to remove waste from your blood and manage fluid levels in the event that your kidneys stop working
- Palliative care to manage pain and keep you comfortable while other treatments are administered
- Donating your organs and tissues for transplants or donating your body for scientific study
Consider carefully what your wishes are should you be in a situation where you can no longer consent to medical care. If you name a power of attorney for healthcare or a healthcare agent, they will be able to ensure that your living will is respected in regard to your care. If you do not have a living will, your power of attorney for healthcare will make these decisions.
Purchase life insurance
If you have not already, you should consider purchasing life insurance when you begin the estate planning process. If you already have life insurance, you should review the amount of insurance for both parents periodically to make sure you have enough coverage and your beneficiary designations are still correct.
While purchasing life insurance, consider how much money your family would need
in your absence. They will likely have to replace income as well as account for additional support for the children as they grow up. The best way to understand how much life insurance you need is to work with an insurance agent.
While it can certainly be a challenge to think about some of these things while you are young, healthy, and still building your career, it’s important for young families to create an estate plan before they really need it.
When it comes to creating a will or establishing power of attorney, make sure to consult with a knowledgeable attorney who can guide you through the process. Similarly, as you're considering life insurance options, reach out to a trusted life insurance company
or agent for help.
Taking the steps above to protect yourself, your family, and your assets will give you peace of mind in knowing everything is taken care of in your absence.
To learn how Germania Life can help you and your family plan for the future, request a free quote online or contact Germania Life at 1-800-392-2202 ext. 2060, email@example.com.