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As preparations are made for a new child to enter into a home, expecting parents also need to consider their estate plan.  This may only require a few simple documents, but it is important both before and after the baby is born to have some key documents in place and consider certain planning.

Health Care Directives. Before the child is born it is important that the mother have health care directives drawn up appointing who she would like to make health care decisions if she is unable.  In the unlikely event there is a complication during delivery, this allows her partner to step in and make decisions.  This is even more important with unmarried couples, because without a valid health care directive, blood relations have the ability to make decisions that the partner simply does not under the law.

Will.  A simple will needs to be considered even if there are not many assets, so that a guardian can be appointed.  A guardian is the person that cares for your child if you are unable.  A guardian should be carefully thought out and considered and as time goes on may change.  It does not matter if a guardian is perfectly able to handle finances; a trustee (see below) can handle that if the guardian is not financially savvy.  A guardian does not have to be a family member; the guardian may be a close friend.  Though not mandatory, it is a good idea to appoint an alternate guardian in case the first is unable to serve.  The simple step of creating a will and appointing a guardian keeps well meaning relatives from fighting over the care of a child should the unimaginable occur.  Again, if parents are not married, it is very important that one another are listed as the primary guardian.  That way if something should happen to one partner, there is a document in place naming the remaining partner guardian.

Trust.  A trust is not for everyone, however, it should be carefully considered when there are minor children involved.  A trust is a document that would hold any assets, including life insurance and retirement plan benefits.  The trustee then could invest and distribute assets as necessary for the benefit of the child or children, without being under the jurisdiction of the probate court.  Furthermore, when a child attains age 18, the assets are not required to be distributed.  In a trust, the assets remain in trust, for the benefit of the children until an age determined by the parents, generally around age 23, though they assets may be distributed earlier, later, or remain in trust forever.

Life Insurance.  Expecting parents should meet with a financial adviser to determine if life insurance is a helpful tool in their particular situation.  Often times when children are young, life insurance is a proper investment to replace lost wages from a parent, which assists the remaining parent or guardian, in raising the child. 

529 Plan.  Once the child arrives, parents should consider whether a 529 Plan is appropriate.  A 529 Plan can be set up in any state and places after tax dollars into an investment account.  This investment account grows and when a child takes the money out for college, it is distributed tax free.  If there are assets left over upon the completion of education, the assets can be transferred to another child or taken out in certain circumstances free of tax.

These simple steps can help a new family thrive.  Much like a birth plan, having an estate plan in place makes everything run a little more smoothly.

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