Jul 1, 2022 Estate Planning for New Parents
When a young couple is starting a new life together, estate planning is probably the last topic on their minds. But, the birth of a child should change that. Suddenly, new parents become responsible for the life of another person, one who will depend on their good judgment and planning.
There are immediate estate planning steps new parents should make upon the birth of their first baby.
Ely J. Rosenzveig & Associates has extensive experience in successfully guiding new parents through the process of securing their family’s stability in case either or both parents suffer premature incapacitation or death. This post describes the most important legal instruments that will protect your minor children and allow you to direct who is entrusted with their care and nurturing and how they will be raised should an accident or illness leave them wanting, or worse — parentless.
Most Valuable Estate Planning Steps for New Parents
If you’re a new parent wondering what estate planning steps you need to take to address your child’s future needs, you can begin by asking these questions:
- Who will take care of my kids if I die or become incapacitated?
- How do I make sure my spouse gets all my assets if I predecease them?
- How can I ensure that my kids are educated and raised with values I approve of?
- Who can I trust to responsibly manage the money my kids will receive when I’m gone?
- Can I position my money while I’m healthy to be accessible for my kids benefit?
- Who will make health decisions for me if I become incapacitated?
- What can I do to reduce or eliminate unnecessary expenses for my survivors?
The answer to each of these questions is by working with an experienced estate planning attorney and drafting effective legal documents that allow you to control how each issue is resolved in your kids’ best interest.
Naming a Guardian for Your Children in Case You Are Deceased or Disabled
In New York, a Standby Guardian Law provides a means by which parents can designate an individual in advance to assume legal guardianship over their children if the parent is unable to fulfill that responsibility. A living spouse or an ex who is the child’s natural parent will be the favored guardian unless the guardian named as the Standby Guardian can show that extraordinary circumstances make the parent unfit or unable to care for the children.
The benefit of conducting the Standby Guardianship proceeding while a parent is present and able to participate in the process is that any legal obstacles or complicating issues can be dealt with during a time of relative calm rather than in response to an emergency.
When selecting a person to act as your child’s Standby Guardian, you need to be sure they want the responsibility and are available. Your children’s preference is also important if they are old enough to express their choice. By formally declaring your Standby Guardian designee (by executing a Designation of Standby Guardian Form [with witness attestations], and filing a petition for the appointment of a standby guardian with the Court), you strongly influence the Surrogate Court’s (or the Family Court’s) decision as to who to appoint as guardian, although the “best interest of the child” will always be the determining factor.
Name Your Spouse as Sole Beneficiary in a Will
Under New York law, if a parent with a minor children dies without a Will, the law of Intestate Succession provides that the surviving spouse gets $50,000 plus half of the remaining estate. The other half goes to the children in equal shares. But since minor children cannot inherit money or property directly, the Surrogate’s Court will name a guardian who would manage and control the children’s funds until they reach the age of majority at 18. The guardian is required to provide an accounting and regular updates to the Court, and owes a fiduciary duty to administer the children’s funds in their best interest.
When the minor child reaches age 18, the funds that remain would be paid to them in a lump sum, leaving them free to burn through it as they wish.
By creating a Will in which your spouse inherits (receives) all your estate assets, your spouse retains financial responsibility and controls how and when funds are used for each member of the family’s benefit.
Another option is to create accounts for your children under the Uniform Transfer to Minors Act (UTMA) that offer certain tax advantages and efficiencies, and that enable you, as parent, to protect and preserve your children’s funds until they reach age 21.
You Can Create a Testamentary Trust Instead
A Testamentary Trust is a term in a Will which provides for a deceased parent’s assets to be paid into a Trust, controlled by a trustee whom the parent selects, trusting them to act prudently, responsibly, and according to whatever directions the parent specified in the Trust document. The parent can dictate that the funds be used for the kids’ college education, for their marriages, or that it be paid in certain amounts as they reach specified age and other milestones.
Revisit All Beneficiary Designations
Many young people name beneficiaries on various accounts and policies before they marry or have children. If you have retirement accounts at work, or life insurance policies, you may have named other family members, parents, or siblings as beneficiaries. The beneficiary you name will receive the proceeds of these accounts regardless of what your Will directs. It is important, therefore, upon marriage and parenthood, to review beneficiary designations that you may have made on your accounts, policies and other assets, to ensure that they reflect your current wishes.
It is important to work with your estate planning attorney to determine the best strategy to transfer the proceeds for your children’s benefit while reducing probate-related litigation costs or unnecessary tax obligations.
Other Important Estate Planning Documents for New Parents
All adults who want to plan responsibly for future uncertainties should include these other documents in their comprehensive estate plan:
- Healthcare Proxy
- Living Will
- Durable Power of Attorney
- Designated Guardian for Themselves (if incapacitated)
Ely J. Rosenzveig & Associates Will Help You Plan for Your Family’s Circumstances
Only your family circumstances will determine which set of estate planning instruments best serves your family’s interests. The nature and extent of your assets, how many children you have, whether you have a child with special needs, whether you were married previously, your health, your age, and other facts of your life will inform how your estate plan will be structured in your and your family’s best interest.
At Ely J. Rosenzveig & Associates, we work with you to consider all the factors that matter to you—that you care about. We will establish a sound, reliable, and effective plan to achieve your goals.