In this five-part series, we’ll walk through these considerations and provide a roadmap to follow as you financially prepare to add a new bundle of joy to your family.
Today, we’ll begin by discussing one of the cornerstones of financial planning: your estate documents.
WHY IS ESTATE PLANNING IMPORTANT FOR PARENTS?
While everyone should consider what will happen to their financial assets when they’re gone, it’s particularly important for parents of children under the age of 18. Although it’s a conversation many people prefer to avoid, it’s crucial to consider who you want to raise your children if something happens to you or your partner, as well as who will make financial and health care decisions on your behalf if you are incapacitated in some way. To that end, your estate planning should include a will, an advance directive or living will, medical power of attorney and financial power of attorney.
WHAT’S INCLUDED IN AN ESTATE PLAN?
A will is important because it indicates how your assets should be distributed, and to whom, after your passing. If you had a will in place before you added children to your family, chances are it was a so-called “sweetheart will” that left everything to your spouse or partner. When you have a minor child, however, you may want to consider a minor’s trust. This type of trust holds assets on your child’s behalf and ensures they will be used for his or her benefit. It also allows you to name a guardian. This will be particularly important in the event of a “common disaster,” which is the legal term used when both parents die unexpectedly at the same time.
ADVANCE DIRECTIVE OR LIVING WILL
This important medical document provides instructions for doctors and nurses about the measures you want taken in end-of-life scenarios. For instance, you may note whether you wish to be placed on life support, or whether you would want artificial nutrition. Not only does an advance directive or living will ensure your wishes are met, but these documents also relieve your loved ones of the burden of medical decision-making.
MEDICAL POWER OF ATTORNEY
A medical power of attorney, also called a healthcare power of attorney, is a legal instrument that specifies someone to make healthcare decisions on your behalf if you become unable to do so on your own. Most often, a spouse is named in this document, but it could also be another trusted person in your life with whom you have previously discussed your wishes. It’s important to note that you do not have to be terminally ill for the medical power of attorney to come into effect; it will also serve you in situations of accidental injury or temporary medical impairment.
FINANCIAL POWER OF ATTORNEY
As you might have guessed, a financial power of attorney is similar to a medical power of attorney, except that it names a person to manage financial affairs on your behalf. This document makes it possible for a trusted person to file taxes on your behalf, manage your investments and pay off debts.
HOW TO GET STARTED CREATING AN ESTATE PLAN
If you’re ready to begin drafting the above legal documents, it is best to use the services of a board-certified estate planning attorney. Establishing a relationship with an attorney in your area is valuable both in executing these documents and in the event they are used at some point in time.
Estate planning is an important step for all parents to take. It helps to ensure your children are raised in the way you would hope even if you aren’t there to raise them yourself, and it also provides you with financial peace of mind as your family grows and thrives.