As a new parent, your attention is mostly focused on figuring out how to take care of your newborn – and how to get them to sleep at night so you can get some rest. But just as important as caring for your child today is creating an estate plan that protects them in the future.
Estate planning for parents with minor children goes beyond dividing financial assets. It also ensures that trusted individuals are legally designated to care for your children, manage their inheritance and make decisions on their behalf if something happens to you.
When creating an estate plan as a parent, there are several critical decisions to make. The following four items are especially important for parents of young children to consider.
Choose guardians and decision makers you trust.
Consider who you trust to take care of your children. This includes choosing:
- A guardian, to handle your child’s day-to-day care
- A person to manage and distribute assets on your child’s behalf
Select individuals who understand your values and are willing to carry out your wishes. Most importantly, make those wishes legally binding and put them in writing. Verbal agreements are not enforceable in court.
Create a will – and consider a trust
A will is a legal document that outlines how your property should be distributed after your death. It can also:
- Name a guardian for your minor children
- Appoint an executor to carry out your wishes
- Specify how and when assets are distributed
Because minor children cannot legally manage property, many parents also choose to create a trust. A trust establishes a fund from which the children's financial conservator or trustee can draw money to cover their expenses until they reach an age you choose. An estate planning attorney can help determine whether a trust is appropriate based on your family’s financial situation.
Name a guardian for your minor children
Your will should clearly name a legal guardian to care for your minor children. And because children can't own property until they turn 18, your will may also name a conservator or trustee to manage the children's assets.
One person can serve as both the personal guardian and the financial conservator, or those roles can be served by different people. Consider reviewing your choices annually or after major life events, especially if personal and financial situations change for your family or your designated guardian or conservator.
Review and update your beneficiaries
If assets are intended for your children, it’s often best to name a trust as the beneficiary rather than naming a minor child directly. This is important to note because minor children can’t receive the proceeds, and the insurance company will seek a court order designating how (and to whom) proceeds should be paid. Check with an attorney in your state for the proper form of designation.
Keep in mind, if you have a life insurance policy, 401(k) or IRA account, the beneficiary designations on these accounts overrule wills. The funds in these accounts will be distributed to whomever you name in those documents – regardless of whom you specify in your will.
Estate planning can feel overwhelming, especially for new parents, but it’s one of the most important steps you can take to protect your children and your family’s future.
Working with an estate planning attorney can help ensure you have the right documents in place, from wills and trusts to guardianship designations. Taking action now provides peace of mind, knowing your children will be cared for according to your wishes.
Frequently asked questions
What happens to my children if I die without a will?
If you die without a will, a court will decide who becomes your children’s guardian and how your assets are distributed – possibly in ways you wouldn’t choose.
Do I need a trust if I already have a will?
A will names guardians and outlines asset distribution, but a trust can help manage assets for your children until they reach adulthood. Many parents use both.
Can I name my child as a beneficiary on my life insurance policy?
Minor children can’t directly receive proceeds. Naming a trust or trustee helps avoid court involvement and ensures funds are managed properly.
How often should I update my estate plan?
You should review your estate plan every few years or after major life changes, such as having another child, moving states or changing guardians.
Do both parents need an estate plan?
Yes. Each parent should have their own estate planning documents to ensure coverage in different scenarios.