It’s very common for people to start thinking about estate planning when they have their first child. Naturally, even people who aren’t parents can certainly benefit from an estate plan. But having a child makes them think about it in a different light, because this child represents the next generation that will largely be addressed in the estate plan.
There are many different things that people should consider at this time. Below are two of the most important factors for new parents.
Preserving assets
To begin with, many children are not able to inherit assets directly. They’re still underage, so they can’t take control of real estate or financial accounts until they turn 18.
To make sure that those assets are saved for the next generation, new parents may decide to set up a trust. When they pass away, their assets then transfer into the trust, which can hold them until the child comes of age. The parents can also use this trust to earmark specific funds for things like college tuition or whatever else they deem important.
Establishing a guardianship
On top of that, parents need to think about what will happen to their child if they pass away while the child is still underage. They may not think this is likely, but it could happen in a car accident, due to illness or in another unexpected way.
One of the best things to do to address this uncertain future is to set up a guardianship. Someone else is given the legal ability to take care of the child, to live with them, to make important decisions on their behalf and much more. The parents are essentially choosing someone to replace them if they’re not there to raise the child on their own.
Creating an estate plan is important, but it can also be complex—and it’s crucial to get the details right. If you’re interested in doing so, be sure you know what legal steps to take.