By Brian McCann
Learn more about Brian on NerdWallet’s Ask an Advisor
If your family is like many, estate planning is among the most overdue items on your financial planning to-do list. After all, no one wants to contemplate the circumstances that would call for the use of these documents. But if you’ve recently had a baby and you don’t have an estate plan, it’s time to make one.
An estate plan is typically a series of legal documents developed with a qualified estate planning attorney. It outlines your wishes for disposition of your assets and responsibility for your dependents in the event of your death and is based on your state’s laws and probate system. Similar to life insurance, it’s not for you, but for your loved ones in case something happens to you.
Rather than listing the tools and techniques that go into an estate plan, I’m going to talk about why you need one in the first place.
You need an estate plan for your children
In my opinion, this is the most important consideration. You’ll determine who you want to care for your children if you and your spouse die early. You can name one person or family to manage your children’s financial affairs, also called the Guardian of the Estate, and another to raise your children, or act as Guardian of the Person — or one person or family can fill both roles.
This can lead to discussions of all sorts of emotional topics. Some people fear offending family members who aren’t “picked” to be guardian. When my wife and I made this decision, we found it to be much more complicated than we expected. I would suggest taking plenty of time to think things through. You should also consider how you’d like non-legal aspects of the guardianship to be managed — for example, making sure that other family members would feel comfortable visiting your children.
Guardianship shouldn’t be a surprise to anyone. Make sure the people who would be responsible for your children are willing participants in your plan.
You need an estate plan for your loved ones
Your estate plan will tell your loved ones how to make health care decisions on your behalf if you become incapacitated. As you can imagine, this is an enormous responsibility for the person who undertakes it, so clearly state your intentions. It would be unfortunate if your surviving relations had to guess what your desires would be.
You need an estate plan for your stuff
Although most of your assets and belongings are just stuff, they potentially could carry emotional implications if you were to die. Having the proper estate plan will speed up, or even eliminate, the probate process. This will save your heirs time, money and, most importantly, grief. If you have specific instructions for the disposition of your assets, you can express the reasons directly in your estate plan, with the hope of heading off hard feelings among your heirs.
My wife and I found several unexpected benefits of the estate planning process. For one, our estate planning team is part of a larger firm. If we ever need any legal help — even outside of estate law — we now have a firm that we know and trust. We also found it very rewarding to talk through some of these troubling topics in a structured way. It gave us an opportunity to think about and discuss our values with those close to us.
Contemplating the death or disability of yourself or your spouse is tough. There’s no way around it. But working with a good team to develop a plan will leave you with peace of mind that your children are taken care of and that your wishes are clear. Most importantly, it will make the process less painful for the ones you love.