Adding a new child to the family will inevitably mean changes to the financial and legal circumstances of the entire household. Becoming new parents is one of the most common reasons that people start the estate planning process. They want to protect their children regardless of what the future holds.
Despite their best intentions, they may make some significant mistakes in that process that will compromise how effective and protective their estate plan actually is. These are some of the most common errors that new parents commit when putting together an estate plan.
They leave resources directly to children
A newborn baby does not have the ability to manage inherited property, nor do they have the legal authority to own certain assets. Therefore, the guardian charged with their care will have control over their inheritance if they receive the assets directly. Parents can reduce the likelihood of their children suffering financial abuse in the future by using a trust as a way to create a layer of separation between the child’s guardian and their inheritance.
They don’t talk with their guardian candidates
It takes a lot of careful consideration to choose the right person to serve as guardian if anything were to happen to a child’s parents. Unfortunately, it is quite common for people to just assume that the person they choose will accept that responsibility if anything were to happen to them. Not only should parents talk about guardianship candidacy with individual people, but they may also want to include alternative options in their documents in case the person they select is no longer available to help.
They don’t create living documents
Testamentary documents that address a child’s needs after parents die are obviously valuable, but children will also be vulnerable if a parent is incapacitated and unable to manage the household for several months. Powers of attorney and advance directives are very important for ensuring that parents who experience a medical emergency receive proper support and have someone to take over their obligations until they recover.
Learning about the mistakes that other people make when creating estate plans as new parents may help those who just had a child or are about to welcome a new addition to their family to more effectively safeguard their family’s best interests. Seeking legal guidance is a good place to start.