In an increasingly complex and costly world, there’s more to taking care of a young child than changing diapers, walking to the park and cutting the crusts off of sandwiches. If you’re like most parents, the idea that there are enough legal and financial issues relating to your baby to warrant a checklist will come as a surprise. But, protecting your children requires forethought. This legal and financial planning checklist for young parents addresses seven issues you’ll want to address as early as possible in your children’s lives.
- Add your child to your health insurance as soon as possible. Many new parents don’t realize that most insurance policies require parents to update their policies within 30 days of a child’s birth or they could refuse coverage until the next open enrollment period. Don’t make the common mistake of assuming that the child is added automatically, since the insurance company receives claims relating to the birth.
- Reassess your budget. Most people realize that a new member of the family will mean new expenses and require some financial adjustment, but don’t lose sight of the fact that your new dependent also means it’s all the more important that you plan well for the future. Build an emergency fund into the new budget if you don’t already have one, and consider increasing savings or other investments.
- Provide for guardianship in the event that you die or become disabled. No one wants to think about leaving their children orphaned, and if you’re young and healthy, the possibility is remote. Still, a question as important as who will raise your children is not one you can afford to leave to chance. Appointing a guardian will not only allow you to make that choice for your children, but will give you the opportunity to talk with the potential guardian about your wishes and to ensure that he or she is comfortable taking on that responsibility.
- Create an estate plan that ensures your children will be cared for if you pass away before they reach the age of majority. Creating a trust and appointing someone you can rely on to serve as trustee is one way to ensure that your children’s needs are met while they are minors and unable to control their own inheritance.
- Purchase life insurance. Many young adults don’t see life insurance as an important investment before they have children. However, once someone is entirely dependent on you for his or her support, it becomes critical to ensure that resources are available if you meet with an unexpected illness or accident. Making a trust the beneficiary of your life insurance policy is a good way to ensure that the child’s needs are provided for until he reaches the age of majority. You can even specify the purposes trust assets can be used for, such as education and medical care.
- Consider executing a medical consent form if your child is cared for by a nanny or is regularly in the care of grandparents or other relatives. Working with an attorney to create this type of consent form will allow you to determine the degree of authority to grant caregivers, ensuring both that your child has access to medical care in case of an emergency and that you retain control of important decisions.
- Look into college savings plans. This may seem premature when you’re bringing your baby home from the hospital or teaching your toddler his ABCs, but there is often a significant benefit to investing early—and not just the fact that you’ll be accruing and compounding interest over a longer period of time. Some plans actually incentivize early investment, such as state plans that allow parents to pre-pay for tuition at present rates.
Of course, every family is different. While this legal and financial planning checklist contains core issues that are relevant for most young families, it’s not exhaustive. Your financial planner is the best source of information and advice about increasing savings or investments, planning for your child’s education, and the type of life insurance that best suits your needs. An estate lawyer can assist with guardianship, consent forms, trust creation, and other means of protecting your children today and in the future.