You just brought a baby into the world, so you're probably not thinking about passing away any time soon. Sadly, that's the mindset of many new parents, and then tragedy strikes, leaving a young family without an estate plan.
It may sound morbid to start planning for the end of your life when you just began a new one, but it can be essential to making sure your children are taken care of. Here's what new parents need to know about estate planning.
Where There's a Will, There's a Way
Sure, you could die without a will. But then it will be up to federal and state probate codes to distribute your assets, which could mean a lot more time, cost, and confusion. And why leave your children's inheritance up to the courts when you can take care of it yourself?
And a will doesn't just cover physical and financial assets like a house, car, and investment portfolio. Young parents are likely to have significant digital assets as well -- photos, music, writing, etc. -- stored in the cloud or elsewhere. Many states have digital account laws that allow access after death, and social media sites generally allow you to designate a person who can take over your account upon death or incapacity.
You can provide online and personal account information in a will so that beneficiaries can access your computer's hard drive or digital storage in the cloud. And a living will can cover end of life decisions should you become incapacitated.
A Will Isn't Everything
A will is a great place to start your estate plan, but it likely won't comprise your entire estate plan. Even a living will may not cover all of your medical scenarios, so new parents may want to consider a durable power of attorney or advanced health directive. A health directive can explain what you want to happen if you are incapacitated or unable to make medical decisions on your own, and a durable power of attorney can designate someone to make those decisions on your behalf.
And while a will can pass on your assets after your death, it can't create those assets before then -- that's up to you. Part of have an estate plan is building an estate so make sure you have a retirement plan, whether it's a 401(k), Roth IRA, or some other investment option.