The hat I'm putting on today is my "lawyer" hat! That means I'm getting into all those yucky boring things you really don't WANT to think about...but really should (because ignoring it doesn't make it disappear!) This is especially focused on new parents, but it applies whether you are new parents, old parents or not parents at all...here are a few things you should really consider with a big life event:
Make a basic will. I'm not saying go out and get a lawyer (although us lawyers do like that) but just make a basic will...I don't care if it's from Willmaker (I love Quicken products, and have heard great things about this one). You may even have legal insurance you can sign up for through your employer that covers a free will every year (both my employer and Kevin's previous one offered this). You may be thinking "we have no assets...why?" Well before law school I thought that too. If your death is by a sudden accident that involves a lawsuit, your estate may receive hundreds of thousands of dollars. Depending on your state laws, your spouse may not receive all of that money. It may go in part to you children, which means it could be tied up until they reach the age of 18 or 19, and your spouse may need that money for the next many years in order to help support the family. If you don't have children, the state laws could split that money could be split between your spouse and your parents. A will also names guardians for your children, as well as someone to manage money for them if you and your spouse are both gone. Not having a will creates more problems and family disputes as your family may go to a heated court battle over all of these things.
Check your Beneficiary Designations. Anything you may have a beneficiary designation on, pull the documents out and check who the current person is. Whoever is named, gets the money. Things with beneficiary designations often are one of your biggest assets. If you're like the average American, you'll likely put your spouse first, and as a contingent you can name your child or a trust.
Get a Durable and Health Care Power of Attorney. You may not know what these documents are, but its something I think everyone should have. A Durable Power of Attorney is a document that authorizes someone that you pick to make decisions about your property if you cannot act for yourself. The Health Care POA authorizes someone to make health care decisions for you if you cannot. It seems like a small thing, but it would be a huge hassle, extra money, and frustration if something happened to me and Kevin couldn't get to all of our assets. For example, Kevin likely could not sell our house or cars if I was in a coma since it is in both our names, without going to court and getting appointed. If we were struggling financially due to a huge medical issue, the last thing he should be dealing with his not being able to liquidate assets if needed.
Get Life Insurance. Our first 3 years of marriage, Kevin and I decided there was no need to have life insurance. We had no mortgage, no kids, and both of us were working. That meant if one of us died, the other would be just fine. There was no one relying on us financially. Boy have things changed! The same year we bought a house, we had a child, and went to a single income family. That means we really needed life insurance because if something happened to one of us, the other would need financial assistance. Here is how to know if you need life insurance on one or both spouses. Consider if the husband passed, how would the wife and child be financially? Could they get by or would they need help to continue the style of living you'd like them to have? How about if the wife passed? What if you both did? We decided we only needed life insurance on the working spouse, me, at this time even though I would need to make some serious life changes if Kevin were gone in terms of paying for daycare.
Run credit reports. You should do this every year, but with a new child you'll want to continue getting your finances in order, so make sure to check your credit report for anything that shouldn't be on there. You can read how to do that HERE
Consider how you want to save for college, if at all. We've been doing a LOT of research on college savings. That being said, I firmly believe you should be saving for your own retirement first, and your child's college second. The earlier you start for both of these, the better. A few options for college savings are: Using your own Roth IRA account as a way to also save for college, a State 529 plan, or an Education Savings Account. All of these differ, but perhaps in the future we will do a pros/cons post on each of these!
A fellow lawyer friend of mine also just told me about this great book on Preparing for Baby! It covers Legal, Financial, Tax, and Insurance information and is published by the American Bar Association. I can't say I've read it yet, but it is now on my list!
A fellow lawyer friend of mine also just told me about this great book on Preparing for Baby! It covers Legal, Financial, Tax, and Insurance information and is published by the American Bar Association. I can't say I've read it yet, but it is now on my list!
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