Celebrating a birth in your family can be one of the most joyous experiences in life, particularly during the holiday season. The holidays, especially the new year, are also one of the best times to update an estate plan. The two events can go hand-in-hand.
Amending an estate plan is one of the most important things you can do for your loved ones for any reason, but with respect to a new baby, or perhaps grandchild, getting the process started of including them in your estate can be invaluable.
Estate plans are not just about property, but also life choices. For example, if something were to happen to the baby’s parents, who would take care of the child? How would the child be provided for? Choosing a designated guardian and expressly outlining an inheritance in an estate document is one of the most prudent things you could do for a child. Delaying such a decision only creates risk, especially considering that a court might end up choosing for you if you do not.
Estate plans also include legally sound arrangements to pass property and other assets along to family members and named beneficiaries. Wills and trust agreements are two of the more common types of asset transfer plans. One thing to consider, however, is that assets cannot be passed directly to children under the age of eighteen years old. Setting up a trust and naming a trustee, or person who manages the assets placed in trust, may be a desirable planning option.
If the baby has special needs, then he or she may require a planned guardianship arrangement at the “age of majority,” which is usually age 18, but depends on the state where they live. From that point forward, the child is considered an adult in the eyes of the law, even though they may not have the capacity to handle their own affairs. Proactively planning for this may be key.
Tax planning is also important. It may seem unnecessary to consider taxes when planning for a child, but appreciable assets, such as real estate and market investments, are subject to capital gains taxes. Without proper planning, capital gains can seriously disrupt the value of a child’s future inheritance.
These are just a few estate planning items to consider when there is a new birth in your family. We encourage you to contact us to ask us your questions. We are here to help you through the holiday season and in the new year as you plan for yourself and those you love most.