What are the documents every parent needs before having a baby?
The 4 most important documents every parent needs.
(Yes, I am an attorney, but I am not your attorney. Nothing in this post should be construed as legal advice or to create an attorney-client relationship. The information in this site is purely informational and educational. Please consult with your own attorney regarding your personal circumstances.)
WHAT YOU FORGOT ON THE GIFT REGISTRY
You bought the car seat, you put together the crib, and you took the birthing classes. But, are you ready to be parents? Here are the 4 documents you need before you have a baby that you won’t find on a gift registry.
Before you have a baby, all of your possessions, future dreams, and plans are directed by you. If you die, people will be sad, but no one is depending on your care or earnings.
After you become a parent, however, that all changes.
When you become a parent, an entire life is in the center of your care. You are the one to make the health decisions, the financial decisions, to love, to provide, and to nurture.
Before the baby arrives, you spend so much time and energy preparing and planning for their day to day care that you likely are not considering what will happen to that precious baby if you die. And, I can almost guarantee that you haven’t considered what will happen to that precious baby if you become incapacitated for any reason.
THE FOUR DOCUMENTS EVERY PARENT NEEDS
So, if you are looking for a unique baby shower gift or if you are trying to make sure that you have everything you need before baby comes, add these documents. Here are the 4 basic documents that every parent needs to protect their children:
1. Last Will and Testament
You may have put off making a will because you haven’t accumulated that many assets yet. Perhaps you are young, have little money to your name, and haven’t even bought a house.
Yes, you are correct, a will does control to whom your assets go after death, but, more importantly, your will names a guardian for your minor children.
Who will care for, nurture, raise, or protect your children if you die? Who will provide a home, sign them up for school, or buy their Christmas presents if you are no longer around?
Your will is an important element of any estate plan, but it is incredibly important for naming the guardian who will be charged with the care and maintenance of your children if you should die.
WHAT IS A GUARDIAN?
A guardian is the person designated by your will, and ultimately by a court, to make decisions on behalf of your child. He, she, or they is/are responsible for all of the financial, health, and other care decisions for your child.
If you want tips for how to choose a guardian and important considerations, stay tuned!
A common misconception about appointing a guardian in a will is that the appointment is legally binding.
No matter who you choose, your appointment of a guardian in your will is always subject to court approval. Your guardianship selection is given great weight in a court of law, and anyone who wants to challenge the appointment must prove that your children are better off somewhere else.
So, appointing a guardian in a will is all the more important if you have an argumentative family, a contentious ex-spouse, or personal beliefs that aren’t shared by your closest friends or family.
Without the appointment of a guardian, it will be up to a friend or family member to assert himself in court to request the appointment. And, if no one shows up to request to be the guardian, then your child’s fate may lie in the state welfare system.
Every parent should have a Last Will and Testament.
2. A Health Care Representative or Durable Health Care Power of Attorney
Every parent should also meet with an attorney to prepare, as part of a well-rounded estate plan, a Power of Attorney for Health Care decisions.
Unlike a will, a power of attorney operates from incapacity to death. You might be tempted to say, “well, when I am so old to be incapacitated, my kids will be adults.”
And, statistically speaking, you might be right. However, who makes your decisions if you are in a car wreck, you are out of the country, or you are struck by a chronic and debilitating illness?
Further, you might wonder what in the world your health care representative has to do with your child.
Powers in loco parentis
Like I mentioned above, your will (Last Will and Testament) only takes effect at your death. Your health care representative, on the other hand, makes your healthcare decisions during your life. But, what happens if your child needs healthcare decisions while you are incapacitated?
What if you are in a coma, and your child needs stitches, insurance information, or even medical care stemming from the same event that incapacitated you? (What if you are all in a car wreck at the same time?) Who makes your child’s medical decisions then?
Some states, if not all, will allow you to designate powers in loco parentis in your Health Care Power of Attorney or Health Care Representative form.
Powers in loco parentis are powers delegated to another person that allow that person to make decisions as though he or she is the parent of the minor child.
As a parent, it is important that your health care power of attorney designate health care powers in loco parentis to someone equipped to make medical decisions on your child’s behalf.
3. A Durable Property Power of Attorney
Similar to the health care power of attorney, I recommend that every parent has a separate durable power of attorney document for property and finances.
Unlike the healthcare document, this document gives you the ability to appoint someone to make your financial and property decisions. And, like the healthcare power of attorney, the power only springs to life if you are unable to do so.
Again, you want to be sure to delegate powers in loco parentis in your Durable Power of Attorney for Property. This gives your designated agent (the person who makes the decisions) the ability to also pay and manage funds on your minor child’s behalf.
WHY DOES EVERY PARENT NEED BOTH A POWER OF ATTORNEY FOR PROPERTY AND HEALTH?
For many estate plans attorneys combine both the property and the health care decisions in one large document. However, there are a number of reasons why you want to consider having 2 different documents and dividing the powers.
For many, the ability to keep health care decisions private is extremely important. And, in the event that your financial attorney in fact (the person making decisions under your property power of attorney) needs to buy or sell property, then the POA must be recorded in the public records. If you have a combined durable power of attorney, then your healthcare information would be recorded too.
Among other reasons, the most important reason to consider having 2 different documents to protect your children is quite simple. In your case it is extremely possible that you want your child’s health and finances managed separately.
Perhaps your brother in law is an accountant and would do a great job handling your finances. But, perhaps your sister is best suited to care for the needs of your young child. Having 2 separate agents to care for you and your children gives you the ability to name 2 separate, and even specialized, individuals to manage your child’s needs.
At any rate, having both a power of attorney over your health and your finances is a must before you have a baby.
4. Term Life Insurance
As an estate planning attorney, I do not sell life insurance. However, as part of every one of my estate planning consultations I review the life insurance policies of my clients.
If you have young children or are about to have a baby, then you must have term life insurance.
Term policies are cheap, easy to obtain, and provide more than their share of peace of mind.
A whole life policy pays out at your death regardless of when you die. Contrastingly, a term policy only pays out if you die within a certain period of time. (i.e. your child’s minority –the term)
Get a simple term policy that covers your child’s first 18-21 years. That way, if you die before he or she becomes an adult, your surviving spouse or your child’s guardian will have the funds to care for your child, provide for his or her needs, and maybe even pay for college.
I have even had some parents be ultra specific in their planning. Some have required their guardian to purchase a specific vehicle, pay off a mortgage, or start a 529 with their insurance policy.
Others trust the guardian or surviving spouse to manage the money without oversight.
HOW MUCH INSURANCE SHOULD I PURCHASE?
As an avid Dave Ramsey listener, I often recommend 10 times your annual salary. Do you make $50,000.00 per year? Get a term policy of $500,000.00.
However, I have personal experience with being rejected for a term policy. I know that you can’t always qualify for the entire 10x formula.
Instead, I recommend that you consider your personal situation. Consider the age of your child, your child’s accustomed standard of living, and the amount you can actually qualify for.
In other words, it depends.
But, don’t skip the term policy even for stay at home parents.
If a stay at home mother passes away, do you still have enough to cover childcare and even in-home help?
Stay at home parents need life insurance too.
IF YOU ARE A PARENT, YOU NEED THESE FOUR DOCUMENTS
Sure, you may have the crib, the car seat, the childlocks, and even the stroller. But, what happens to that baby if the worst happens? Do you have the essential documents to protect your children?
Who will have the legal authority to care for that baby? Who will have the legal authority to make her medical or financial decisions? Appoint someone who will be able to sign her up for school when the fall rolls around.
Add these 4 documents that every parent needs to your baby registry and give yourself some true peace of mind.
For a more comprehensive death planning checklist, check this out.
Are you considering whether you might need a trust too? Check this out.