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How having a baby can change one’s estate planning needs

On Behalf of | Nov 19, 2023 | Estate Planning |

New parents often have quite a lot to worry about after having a baby. One parent, possibly both, will take a leave of absence from work. That can put a strain on the household finances unless employers provide paid leave.

Additionally, needing to provide for every aspect of a child’s health and safety can be quite stressful for new parents. They may struggle to get enough sleep and to find time to take care of themselves in addition to meeting their infant’s needs.

The idea of taking on additional, complex tasks while already taking care of a newborn may seem prohibitively difficult. However, a baby requires not just immediate support but also planning for its ongoing safety and security.

Estate planning can give parents peace of mind

Children remain dependent on their parents until they are older. Even teenagers who are legally adults often still rely on their parents for financial support and guidance. Parents who have just welcomed a new child into their families often need to put a plan in place to meet that child’s needs should anything happen to them while the child is still a dependent. An estate plan provides protection for a baby and peace of mind for parents. The adults can feel confident that their baby will have the support they require should anything unthinkable happen.

What estate planning for a newborn involves

There are multiple different needs that parents can address with the right estate planning paperwork. They can name their child as a beneficiary of their estate in a will. Wills are also where adults can name a guardian for their dependent family members. The process of selecting a guardian and discussing that choice with the adults is a very important step for new parents.

They also need to think about the financial support that their child may require if they die. Carrying enough life insurance to pay existing debts and provide ongoing support for the child can be a smart move. In fact, many parents will use the proceeds from a life insurance policy to fund a trust. Those who use a trust to manage a child’s inheritance instead of a will can preserve assets until children reach adulthood or need certain kinds of support. Unlike a direct inheritance, which would require the control and management of the guardian of the child, a trust can preserve assets for the child to directly inherit when they are an adult.

New parents may also need to think about living documents, including powers of attorney and medical directives. They can ensure that there is someone to manage their finances and to preserve their resources if they become incapacitated while their child is still young. Overall, taking the time to engage in estate planning before or shortly after a child’s birth is a smart move for most new parents.