Bringing a new child into your family is a life-changing moment filled with joy and excitement. Whether through birth or adoption, this new addition means new responsibilities—not just in day-to-day life but also in long-term planning.
Estate planning may not be the first thing on your mind as a new parent, but it is one of the most important steps you can take to protect your child’s future. If something were to happen to you, would your child be financially secure? Who would care for them? These are tough questions, but having a solid estate plan in place ensures that your child’s well-being is legally protected.
In this article, we share three critical estate planning steps every new parent or grandparent should take.
1. Update (or Create) Your Will and Trust
If you already have an estate plan, now is the time to review it. Your new child or grandchild should be included in your will or trust to ensure they receive the assets and care you intend. If you don’t have a will, it’s time to put one in place.
Why is a Will Important?
A will allows you to:
- Name a guardian for your minor child (a must-have in Minnesota).
- Distribute assets according to your wishes, not state law.
- Set up a trust to manage finances for your child’s future needs.
Creating a Testamentary Trust in White Bear Lake
A testamentary trust is a smart way to manage money for a young child. Instead of leaving a lump sum that they can access at 18, a trust allows for structured distributions to pay for education, healthcare, and other expenses until they are financially mature.
Without these legal arrangements, a Minnesota probate court could assign a guardian to manage funds, and your child could inherit a large sum outright at 18—whether they are ready for it or not. Read more in our article, What You Need to Know About Testamentary Trusts: Are They Right for Your Estate Plan?
2. Designate a Guardian for Your Minor Child
One of the most critical estate planning decisions you will make is naming a legal guardian for your minor child. If you and your spouse were to pass away unexpectedly, who would care for your child? Without a designated guardian in your will, the decision would be left to a Minnesota judge, who may choose someone you wouldn’t have preferred.
When selecting a guardian, consider:
- Values and parenting style – Does this person align with your beliefs and how you want your child raised?
- Stability and location – Would your child have to move away from White Bear Lake?
- Financial and emotional readiness – Is this person capable of taking on the responsibility?
It’s essential to have a conversation with the person you choose to ensure they are willing and prepared to take on the role. Additionally, consider naming a backup guardian in case your first choice is unable to serve. A well-planned guardianship designation can prevent family conflicts and ensure your child is raised in a loving, stable environment.
3. Check and Update Beneficiary Designations
Many of your most valuable assets—such as retirement accounts, life insurance policies, and bank accounts—pass directly to named beneficiaries. Your will does not control these assets unless they are designated to a trust.
What Estate Planning Updates Should You Make for a New Child?
- Review your IRA, 401(k), and life insurance policies to confirm that the correct people are listed as beneficiaries.
- Coordinate your beneficiary designations with your will and trust to ensure everything aligns.
- Consider naming a trust as the beneficiary for a minor child to prevent them from inheriting too early.
For example, if your will establishes a trust for your child, your retirement account and life insurance proceeds should be directed to that trust, not to your child outright. This ensures that funds are properly managed for their benefit.
4. Evaluate Your Life Insurance Coverage
Raising a child is expensive, and if something happens to you, your family will need financial security. Life insurance is one of the best ways to ensure that your child’s education, housing, and daily needs are covered if you are no longer around.
How Much Life Insurance Do You Need?
A term life insurance policy is an affordable option that provides coverage for a set period (e.g., until your child turns 18 or 25). The amount of coverage depends on your specific situation, but common considerations include:
- Income replacement – How much would your family need to cover living expenses?
- Education expenses – Will there be enough to pay for college?
- Estate taxes and administrative costs – Will your family have funds to cover legal fees and taxes?
If you’re unsure about the right coverage amount, an estate planning attorney can work with your financial planner to calculate your family’s needs.
Why White Bear Lake Families with a New Child Should Plan Now
White Bear Lake is a wonderful community to raise a family, but estate planning laws in Minnesota can be complex. Without a proper will or trust, the courts will decide who raises your child and how your assets are distributed. This can cause unnecessary stress and financial burdens for your family.
By taking these essential steps—updating your will, designating a guardian, checking beneficiary designations, and securing life insurance—you ensure that your child’s future is protected and secure.
If you’re a White Bear Lake, MN resident and need guidance, our firm is here to help. Book a call with our office in Minneapolis or Woodbury today to create or update your estate plan.
Reference: Experian (Oct. 13, 2020) “How to Plan Your Estate as a New Parent – Experian”
