For some reason, I am friendly with lots of women. Perhaps it is due to the influence of my tough mother and two strong older sisters, or that I followed Benjamin Franklin’s advice to marry someone smarter than me. However, this does not mean that I fully understand how women function.
For example, I am going to have dinner this week with an old friend of mine (we’ll call him John) who I have not seen in a long time. In fact, we unfortunately had to miss his wedding, and we have yet to meet John’s wife (we’ll call her Sally).
A day or two before I made the dinner plan, my wife said to me that she was shocked that John and Sally hadn’t “announced it yet.”
“Announced what?” I asked.
“That they’re going to have a baby. I hope nothing’s wrong.”
“What the heck are you talking about?”
“Oh come on, it’s so obvious.” Mind you, my wife has never met Sally either.
“Did they say something to you?”
“Well then how do you know?”
Five points to anyone who can guess what exciting news John told me when we finalized the dinner plan a couple of days later (that’s right, Sally is expecting). My wife’s ability to sense this in other women is uncanny, but this is the first time she’s ever done it with someone unknown to her.
So if you are expecting a new arrival, what sort of estate planning matters do you need to start thinking about? Let’s examine:
This blog is full of reasons why you need to get one immediately, and now you have an additional one coming. Your estate planning attorney can use language that will include your child, even if unborn, such as “all children of our marriage born after this date.”
You have an Existing Will or Living Trust
Take a look at your will or living trust and see if it refers to any unnamed children, as illustrated immediately above. If it does, you are technically covered. However, if your family situation has changed since you drafted your documents (such as purchasing a house, having a higher net worth, moved to another state, etc.), or if no children are named, this would be a good time to redraft.
By the way, you could also opt to simply have your existing will revised with a codicil to include your new child after its birth. However, since the advent of word processing and the ability to easily change the original, codicils have become much less common. Instead, reprinting your original will to include baby should not be too expensive.
What Primary Issues Do I Need to Consider?
With all of your free time preparing for your new family member, the following non-exhaustive set of issues will also need to be dealt with:
- If something happens to you both, who will be the child’s guardian?
- If something happens to you both, who will make financial decisions regarding the child’s inherited assets (i.e. who will be the custodian)?
- Do you want to start a savings account for the child?
- Do you want the money in their name or in an UTMA account?
- If you want to start saving for college, which state’s 529 plan is most appropriate?
- Do you want to set up a trust for the child?
- If you don’t want the child to get the money outright at age 18 or 21, what age is appropriate?
- Should you create equal trusts for each child or create a single “pot trust” for them all?
- Are special needs issues involved?
- Do any relatives need to change their estate plans?
- If You Eat a Frog First Thing in the Morning, the Rest of Your Day Will Be Wonderful (www.texaswillsandtrustslaw.com)
- My Holiday Example of Why Estate Planning is Important (vaestateplanner.wordpress.com)
- 10 Money Management Tips For Expectant Parents (canadianfinanceblog.com)
- How to Prepare for a Baby Without Going Broke (www.getrichslowly.org)