If you and your spouse or partner just welcomed a new child into your family, whether by birth or adoption, congratulations! As new parents, these likely will be some of the happiest, albeit busiest, days you will ever experience. In all the hustle and bustle that new addition to your family entails, however, do not forget to look at the big picture.
Kiplinger explains that new parenthood is the perfect time to begin your estate plan. Do not allow your youth or your less-than-wealthy financial status to deter you from performing this very important parental duty. After all, parenthood means, at minimum, an 18-year commitment on your part and that of your spouse or partner to provide for this child to the best of your ability.
Start with your will
If nothing else, you and your partner and spouse need to construct your respective last wills and testaments. Why? Because these are the documents in which you designate the person or people you want to assume guardianship of your child and finish raising him or her for you if the worst happens and both of you die together in a car crash or other catastrophe before he or she reaches his or her age of majority.
Add a trust
While a will can determine who will finish raising your child for you if the need arises, it cannot adequately provide them with the financial wherewithal to do so. This is why your wisest strategy consists of creating and funding a trust for the benefit of your child. You can name yourself as trustee, thereby continuing to control whatever assets you place in the trust, but you should also name the person you designated as your child’s guardian in your will as successor trustee.
As for funding this trust, you can do so quite inexpensively by means of buying life insurance policies on your life and that of your spouse or partner and naming the trust as the beneficiaries of these policies.
