Have you just welcomed a new baby to your family? Protecting your newborn means more than car seats and babyproofing. Creating an estate plan to protect your child no matter what life brings is an often overlooked, but important step to complete. Many people delay establishing an estate plan. They delay due to lack of time, money, knowledge, or fear of thinking about death. If you just had a baby, now is the time to meet an estate planning attorney and make a plan.
An estate plan is a set of legal tools for managing your money and property. It also names who will care for your little ones if you can’t or after your death. Working with an estate planning attorney helps ensure your plan protects your family properly. This is especially important when you have a new baby in the family.
Provide for the New Baby’s Care
A key reason new parents need an estate plan is to nominate a guardian for their minor child. Most parents have strong ideas on who they want raising their children, and would prefer to not leave it to the court’s decision. The guardian cares for your child if you and the other parent die or can’t care for them. This can be one of the most difficult choices for parents making their estate plan, since they want to choose someone willing, able, and who shares their values and parenting style. There are several legal ways to nominate a guardian for your child.
Nomination in a Last Will and Testament
A last will and testament (often referred to simply as a will) is the document in which you can officially nominate a guardian—ideally, along with backups—for your minor child. Parents who set up a trust rather than a will to determine how their children’s inheritance will be handled still create what is called a pour-over will, which includes your guardian nomination.
While naming a guardian in your will can bring peace of mind, remember that a will takes effect only after your death. It does not address who would care for your child if you became incapacitated during your lifetime. Additionally, a will must go through a legal process known as probate, which can take some time, and is often not efficient as naming guardians during the time following a death.
Nomination in a Separate Writing
Some states, of which Texas is one, allow parents to nominate a guardian in a separate document from their will or trust. Depending on the state, it could take effect only after both parents have passed, or it might also take effect on both parents incapacity. Many parents prefer this method because updating a separate document is easier than changing a will or trust.
Delegation of Parental Powers (Power of Attorney for Minor Children)
In some states, you can nominate someone to act for your child if you’re temporarily unavailable. This document takes effect immediately, without needing death or incapacity. The appointed agent can make healthcare and other decisions for your child. They cannot consent to your child’s marriage or adoption. This is helpful if you leave your child with a grandparent or trusted friend. They can sign permission slips or take your child to the hospital without delay.
Your Children’s Inheritance
Some of your money and property, like bank, investment, and retirement accounts, may have financial value. Other belongings might have deep emotional worth beyond their financial value. A proper estate plan will address both financial and emotional assets. Whether using a will or trust, you can specify who gets your financial accounts. You can also leave instructions for your prized possessions or family heirlooms. These instructions matter if you want to leave specific items to non-family members.
Of course, deciding who gets what is only part of the equation; the process your loved ones will go through to distribute your things matters just as much. This is where the choice between creating a will or a trust—or doing nothing at all—makes a significant difference.
Probate is a court-supervised process for handling a deceased person’s affairs. It includes presenting a will, if one exists, to the probate court. The process involves collecting accounts and property, paying debts, and distributing what remains. Your will helps the court give your money and property to the right people. Without a will, state law decides who inherits, possibly against your wishes.
A revocable living trust is an alternative to a will. A trust holds your property for your benefit during your lifetime. After your death, it passes your property to your loved ones. A properly funded trust helps your family avoid probate, saving time and money. It also keeps your affairs private and reduces stress for your loved ones. A trust lets you control how and when your child receives their inheritance. You can prevent an 18-year-old from receiving a large lump sum too early. Wills can include testamentary trusts with similar instructions to a living trust. However, a will still requires probate, even with a testamentary trust.
Make Your Wishes Known
An estate plan isn’t just for after death; it also covers times when you’re sick or unable to decide. A key part of this planning is naming an agent in a medical power of attorney. This person, known in the document as an Agent, communicates for you or makes medical decisions for you when you’re unable to do so yourself. Being an Agent is a major and serious responsibility. You can ease this burden by discussing your healthcare wishes in advance with your chosen agent. One way to explain your wishes is through an advance directive, also known as a living will. This document gives written guidance about end-of-life care, so loved ones aren’t left guessing your preferences.
What if someone needs to manage your finances when you can’t? This could include things like paying routine bills or even selling property on your behalf if you are out of the country or are too unwell to act for yourself. A document known as a financial power of attorney lets you name someone (also known as your Agent) to handle financial matters for you. You choose if the agent has broad powers or authority in a specific situation. For example, they might manage accounts, pay bills, or just sign one document. Depending on the document and state law, your agent might act right away or only if you’re incapacitated. Even with an agent, you still control your money as long as you’re able to manage it yourself.
Find an Estate Planning Attorney
Having a baby is a huge milestone to celebrate and the perfect time to shape a plan for your family’s future. You have prepared for their arrival in countless ways, from setting up the nursery to babyproofing the house. Estate planning is just as important. Your estate plan will give you peace of mind by protecting your child, appointing their guardian, and ensuring that their financial future is secure no matter what. And, if you already have an estate plan, the addition of a new baby is the optimal time to update your plan to make sure everyone is covered by it. Nielsen Law PLLC Provides family-focused estate and business planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information, and to learn about our firm, please contact us to learn how.
