While creating an estate plan is a smart move for just about anyone, certain situations in life arise that make drafting one even more critical. Having your first child is one such situation. While you may find yourself distracted for a while with adjusting to life with a newborn, you would be wise to devote attention to this important matter as soon as you reasonably can.
Creating, or updating, your estate plan once you have your first child can help you navigate a broad range of important matters. For example, you can use the estate plan to dictate who you would like to care for your child in the event you can no longer do so. Additionally, you can use your estate plan to figure out ways to maximize the amount of your wealth you are able to leave behind for your child or other loved ones, among other objectives. So, what types of estate planning steps may you want to consider taking once you become a first-time parent?
If you have life insurance policies or retirement accounts in place, you probably named someone, such as your spouse, as a beneficiary on these accounts when creating them. Once you have a child, however, your wishes may change. If you have not already named beneficiaries for these and similar accounts, this would be a good time to do so. If you already have a designated beneficiary, you may want to think about replacing that beneficiary with your child or naming both parties as beneficiaries.
Creating trusts and placing some of your assets inside is another important estate planning step to consider taking after having a child. Entering assets into trusts reduces the amount your beneficiaries will ultimately lose to taxes, thereby increasing how much you leave behind for them.
While these are two key estate planning steps to consider taking as a new parent, please note that you may want to update or work on several other key areas.