New parents face so many new challenges–from figuring out how car seats work to figuring out how babies work. I remember taking a deep breath as we opened the door of the hospital, loaded our daughter into the car (including several annoying moments in the parking lot trying to gently put her new born and limp body into the brand new car seat) and out into a whole new world.
Part of that world includes estate planning. I built my practice, in the early days, by giving workshops at preschools, parenting groups and new parent groups at all of the local hospitals. New parents are often sleep deprived, terrified, and overwhelmed. But here’s what I told them, over and over again — you don’t have to do everything now, just put the basics in place and promise yourself to revisit your estate plan in a few years, when you are getting some sleep.
If you are a new parent, or know one, here are the basics:
Start with Choosing Guardians
Sometimes the most difficult thing for new parents to do is to imagine dying before that new baby grows up. But if they don’t step up and make the choice, they’re leaving that choice to a judge who doesn’t know their families (or their in-laws) as well as they do. I tell them to focus on the next three to five years. They can always revisit this later.
Create a Will
While it’s true that a revocable living trust is an excellent estate planning document, for new parents, naming guardians is the most important estate planning task. And that can be accomplished with a simple Will. In fact, the Probate Code permits you to nominate guardians in a simple signed writing, you don’t even have to execute a Will, but most people use Wills because, in addition to nominating guardians, a Will allows parents to put a management plan in place for minor children’s assets too. It’s true that a Will requires a probate to settle an estate, but for young parents who may be strapped for cash and wracked with guilt, a Will is an excellent, inexpensive estate plan that makes a lot of sense.
Buy or Update Life Insurance Policies
Life insurance is a great idea for new parents. Life insurance policies give them the ability to provide their family with financial resources if anything unforeseen should happen. Often, young families own expensive and highly mortgaged homes. If there’s a sudden death, those homes may or may not be easy to sell (remember 2009?). So life insurance provides immediate cash for families in crisis. I always tell my clients that they’re as young and healthy now as they’re ever going to be, so buying insurance now means that their policies will be inexpensive compared to what those policies will cost down the road. Also, I encourage all of my clients to buy policies outside of those provided by their jobs — in this valley getting laid off is a rite of passage, and having a separate policy that’s not connected to a job makes sense.
To learn more about estate planning for new parents, and to read a whole new library of articles that I’ve written on Everyday Estate Planning topics, visit our website and click on Articles.