First, let me begin by offering my most sincere congratulations to you and your spouse on the upcoming addition to your family. As a new parent myself, I am well acquainted with the joy and worry that comes with the news that your little family is beginning, or continuing, to grow.
At a time when you are worrying about fending off your in-laws, color schemes, and baby proofing, it’s important not to forget about your estate planning documents. A new baby is a great time to update your current estate planning documents or to finally have them drafted and executed. If you haven’t already, you should be sure to get in touch with your estate planning attorney as soon as possible to arrange a meeting to discuss updating or creating your estate plan.
While the complexity of your estate plan will vary depending on your income and accumulated wealth, you will want to make sure you have the following documents in place before you meet your bundle of joy:
Last Will and Testament – Both you and your spouse will want to make sure your wills are updated before your child arrives. While you won’t specifically list your child yet, that portion of your will can be easily updated after your baby arrives. Your will should take care of determining how your assets are distributed and make any necessary fiduciary appointments (e.g. executor and/or trustee). A few questions you may want to discuss with your estate planning attorney: 1) Who is getting my assets, and how much are they getting; 2) Do I need or want to include trusts for my spouse and/or my children and descendants; 3) Who do I want as my executor and who do I want to serve as their successor, if necessary; 4) Who will serve as the trustee of any trust created for my spouse and/or my children and descendants; and 5) Do I want my children and descendants to be able to become co-trustees or sole trustees of their trusts (perhaps at specified ages)?
Ancillary Documents – You and your spouse will also want to be sure that you execute power of attorney documents. The documents you should discuss with your estate planning attorney include the Statutory Durable Power of Attorney, the Medical Power of Attorney, the HIPAA Authorization, the Directive to Physicians, and the Declaration of Guardian. These documents can act as a sort of incapacity planning in the event one (or both) of you becomes incapacitated such that the other will be needed to access certain accounts, pay bills, and to make medical decisions related to personal care.
If you are going to be giving birth in a hospital, the Medical Power of Attorney and HIPAA Authorization will be of particular importance. The Medical Power of Attorney makes it clear to the doctor which individual has the power to make medical decisions for an incapacitated person (fathers, this could be important if your spouse becomes incapacitated during the course of delivery and an important medical decision needs to be made). The HIPAA Authorization goes hand-in-hand with the Medical Power of Attorney and directs to the doctors that they can provide the medical agent with any and all information necessary for the agent to make an informed decision.
Beneficiary Designations – Finally, you will want to be sure that any of your assets that pass by beneficiary designation (i.e. IRA’s, 401(k)’s and life insurance policies to name a few) are up to date. Failing to update your beneficiary designations can lead to adverse income tax consequences for your beneficiaries (particularly for IRA’s, 401(k)’s and other retirement assets). Not having a proper beneficiary designation can also cause a large portion of your estate (and for many people their retirement accounts and life insurance policies make up the single biggest portion of their estate) to not pass as you originally intended.
Whether you have weeks or months to go, I encourage you to meet with an estate planning attorney and discuss these documents before you hear or say that famous three letter phrase: “Honey, it’s time.”