It is never too early for parents to begin estate planning. In fact, the months before the new baby arrives may be a perfect time to address financial issues that may otherwise get indefinitely postponed once the life-changing event takes place. There are several steps that expectant parents can take to help ensure a protected future for their coming child.
Budgeting and Planning to Save
Any kind of planning for the future involves a comprehensive understanding of the present. As you begin preparing for the expenses a new baby will bring, you need to evaluate your current monthly budget. This includes listing all the income of you and your partner (if you have one) and all your expenses, both those that come regularly and those that appear variably, for example quarterly premiums. It is only by examining your cash flow that you can prepare to cut costs and, hopefully, to increase savings.
For most couples, starting a baby fund, both for one-time expenses, such as a crib or stroller, and for ongoing costs, such as diapers and daycare, is a good idea. It is important to remember that some expenses that appear to be one-time are really ongoing, for example most car seats have to be replaced as the baby grows.
Saving for College
Since parents today realize the importance of a college diploma in finding successful employment, and higher education is becoming ever more expensive, starting a college fund even before the baby arrives is a good idea. This is especially true because a great many babies about to be born may be attending graduate school as well.
Many estate planning specialists recommend that a 529 college savings plan be used because it allows the parents to retain complete control of the funds, and any monetary growth used for higher education is tax-free of federal, and typically state, taxes. If, your child receives a scholarship and does not require the money saved, the fund can be used for the higher education of another offspring.
Providing Life Insurance and Estate Planning
In order to protect the coming child in the eventuality that one or both parents die young, it is important for expectant parents to have sufficient life insurance to provide for their child. It is also essential that documents be in place to provide appropriate guardianship for the child if this becomes necessary, and that assets be distributed in the most effective manner at the time the child reaches adulthood. This is frequently accomplished by establishing a living trust to control the timing of wealth distribution.
Planning for Retirement
Young couples often find it difficult to imagine retirement, much less plan for it. Nonetheless, planning for later years is an important component of realistic parenting. Apart from providing for the couple, it relieves the child or children of the financial burden of caring for aging parents.
If you are an expectant parent, concerned with protecting your child’s future, the time to consult with an experienced, reputable estate planning attorney is now.
