Question: My husband and I are expecting our first child. We do not have a lot of assets but we do have retirement plans, insurance policies and a house. Everyone keeps telling us that we need a Will. Is that necessary?
Answer: As you prepare for the arrival of your child, it is important to begin to think about your estate plan to protect your growing family. “Estate planning” includes signing a Will, but also signing a power of attorney, health care proxy and living will. Executing a Will and making thoughtful designation of beneficiaries for retirement accounts and life insurance policies ensures the best outcome for your family’s well-being.
In deciding who to name as the beneficiary of your life insurance or retirement plan, you will likely want to provide for your child if you and your spouse are deceased. However, you should not name a minor as the outright beneficiary or contingent beneficiary. Your will can also provide that any monies payable from your estate to your child should be held in a trust for their benefit and then given to them outright at a certain age. Putting these assets in trust allows your child to be taken care of in your absence and avoids the monies being held in a non-interest bearing account for the minor child until they reach the age of 18, at which time they will receive a distribution outright of the full amount. More advanced estate planning can provide for a Descendant’s Trust that can protect your children from creditors, estate taxes and from having to sign a prenuptial agreement to protect their inheritance in case of divorce.
The second major issue is determining who will care for your child if both you and your spouse are unable to do so. Often, couples determine that the appropriate person to care for their child may not be the appropriate person to handle the assets left to the child. A Will can name who you wish to serve as guardian for your child, should anything happen to you, avoiding a potentially lengthy and costly court proceeding to appoint a guardian.
A power of attorney, health care proxy and living will are the documents you sign to make sure you are naming appropriate surrogates to make decisions for you while you are living. The power of attorney names agent(s) to assist you with your finances, while the health care proxy names agent(s) to make medical decisions for you if you are unable to make them for yourself. The living will states your wishes regarding receipt or witholding of treatments. Executing these documents gives you control over your future and assists your family members in following your wishes.
Most young families do not think about their estate planning because they do not want to make difficult decisions about who will care for them or their children if they are unable. Consulting with an estate planning attorney as you begin your family opens up this dialogue and can give you piece of mind that your family will be taken care of in the future.