Even though Justin Timberlake and Jessica Biel’s baby will be born into vast wealth and celebrity, they still have one thing in common with married parents in our neck of the woods. They’ll still need to take these three legal steps when they baby comes.
#1 Identify guardians
It’s ironic to think of the unthinkable during such a time of hope and happiness, but you’ll feel better knowing you have a plan. I always recommend that new parents identify a first and alternate guardian. It will allow you to choose someone you trust, whether it be a family member or friend, and avoid the ugliness of two families fighting for guardianship.
#2 Make a will (or adjust a current one)
Your will is more than a place to name guardians. It’s also way to stipulate how your children are cared for, including financially. For most, a simple will with a trust is enough to protect your young children.
Trusts are usually set so that if one parent dies, the other gets all the assets, and if both die, the assets go into a trust. The will can establish who the trustee will be (it may or may not be the guardian; sometimes it’s an attorney) and how the money is to be used. While a trust can be as general or specific as you like, most new parents set up their trusts so trustees can disburse money as needed during childhood but holds the remainder in trust.
Unless you specify, your child will get the balance of the trust when he or she turns 18. Many parents prefer to have them mature a bit more before receiving funds. Some also stagger the amounts and apply conditions, such as earning a certain grade point average or graduating college. They want their children to start making their own way in the world and develop a work ethic before disbursing the funds.
Establishing a will and trust allows you some control over how your child is raised in case you aren’t here to do it yourself.
#3 Update beneficiaries
Regardless of the wishes you spell out in a will or trust, you’ll need to update beneficiaries on all your qualified investments, such as insurance policies and retirement accounts. That’s because those accounts and listed beneficiaries supercede wills.
Again, many couples choose the surviving parent to be the beneficiary. In the event, the surviving parent also dies, parents often choose to name the estate as the beneficiary so the assets are placed into the trust.
If you’re nervous about making those decisions before you get to know your child — whether he or she will be responsible and trustworthy at a younger age or a later one — remember you can always change it later. The important thing is to get the basics in place right away when the baby comes.
By Sonja Davig, Partner, Johns, Flaherty & Collins. For an estate planning lawyer in La Crosse, call her at 608-784-5678.