Estate planning with a baby
October 14, 2016 5:55 AM Subscribe
We need to get wills. I've never done this before. What am I not considering?
We are about to have a baby and need to get wills. We do not have property and our only real asset is our retirement accounts, on which we already list each other as beneficiaries. I don't see the wills as being a terribly complicated thing given that, but I don't really know what I am forgetting to consider. Some other specifics:
- He has a child from a previous marriage who is covered by a life insurance policy he has at work. Due to a pre-existing health condition, he is not eligible for other life insurance. His ex would retain custody of their son, and get the life insurance, if anything happened.
- If he went first, I would inherit the household stuff and all bank accounts including his retirement fund. If I went first, he would inherit same. If we both went together, his sister would inherit everything and also take the baby.
- We have already spoken with his sister about this plan and she is okay with it and has also agreed she would keep in touch with my parents, whom she is friendly with. We have no pets or other issues. Just household furnishings, bank accounts and the baby.
So, this seems like a pretty straightforward thing? We are going to a lawyer to get it done properly but I just don't know if there is something big we aren't thinking about. My primary concern is that if g-d forbid something happened, I want to make sure there is a good plan for the baby. Obviously I hope it would never come to that. But I would feel better knowing that from an 'official' standpoint this was properly taken care of.
We are about to have a baby and need to get wills. We do not have property and our only real asset is our retirement accounts, on which we already list each other as beneficiaries. I don't see the wills as being a terribly complicated thing given that, but I don't really know what I am forgetting to consider. Some other specifics:
- He has a child from a previous marriage who is covered by a life insurance policy he has at work. Due to a pre-existing health condition, he is not eligible for other life insurance. His ex would retain custody of their son, and get the life insurance, if anything happened.
- If he went first, I would inherit the household stuff and all bank accounts including his retirement fund. If I went first, he would inherit same. If we both went together, his sister would inherit everything and also take the baby.
- We have already spoken with his sister about this plan and she is okay with it and has also agreed she would keep in touch with my parents, whom she is friendly with. We have no pets or other issues. Just household furnishings, bank accounts and the baby.
So, this seems like a pretty straightforward thing? We are going to a lawyer to get it done properly but I just don't know if there is something big we aren't thinking about. My primary concern is that if g-d forbid something happened, I want to make sure there is a good plan for the baby. Obviously I hope it would never come to that. But I would feel better knowing that from an 'official' standpoint this was properly taken care of.
Make sure you future-proof it as well, just in case you have baby #2 show up. A decent lawyer or paralegal will make sure you do this and other steps, so that it doesn't have to be changed if there is another bundle on the doorstep. We did this at much the same life stage as you are, with much the same in assets -- and we used a paralegal who was fantastic, and much cheaper than a lawyer. YMMV.
posted by liquado at 6:41 AM on October 14, 2016 [1 favorite]
posted by liquado at 6:41 AM on October 14, 2016 [1 favorite]
The lawyer will walk you through all the relevant questions, but it might be handy to have thought about the answers already.
Consider adding a name to the list after his sister's, for who would be guardian of your child if the sister is for some reason unable (dies before you, or in the same accident, or has some kind of health disaster, etc). Your parents? Your best friend?
Should you get life insurance in your name to support the baby (since your husband can't buy that)?
Things that are not part of a will, that this could be a good time to take care of: power of attorney, living wills, binder with instructions about funeral wishes, list of assets, info on accessing your accounts, etc.
posted by aimedwander at 6:45 AM on October 14, 2016 [1 favorite]
Consider adding a name to the list after his sister's, for who would be guardian of your child if the sister is for some reason unable (dies before you, or in the same accident, or has some kind of health disaster, etc). Your parents? Your best friend?
Should you get life insurance in your name to support the baby (since your husband can't buy that)?
Things that are not part of a will, that this could be a good time to take care of: power of attorney, living wills, binder with instructions about funeral wishes, list of assets, info on accessing your accounts, etc.
posted by aimedwander at 6:45 AM on October 14, 2016 [1 favorite]
You should get a life insurance policy on your child for which you pay out of pocket. If you were to die, your husband would be faced with childcare and other costs. If you were to both die, your sister will face the same and more. You might find Get Your Shit Together of use.
posted by DarlingBri at 7:18 AM on October 14, 2016
posted by DarlingBri at 7:18 AM on October 14, 2016
Depending on the amount of your assets, you may wish for some of it to be set aside for your child or children, instead of going to their guardian. This can be done with a trust. You'd also need a trustee, who would oversee the assets. You can choose the circumstances under which your child or children get the assets.
Being an executor is challenging and difficult. In the event that both of you die, you may wish to choose a lawyer or trust service to be the executor. This is more expensive, but it relieves the guardian of your children of the burden of being an executor. In the event that both of you die, there is already significant legal work to be done to give the guardian authority over the children.
nthing you looking at getting more life insurance. You are unlikely to have a need for permanent life insurance, so term life insurance is preferable. You may wish to get two policies. Both would have the primary beneficiary as your husband. There can be a secondary beneficiary, if the first beneficiary is dead too. The first policy would have your estate as the beneficiary (or the guardian for the baby.) The second would have the baby as the beneficiary. The proceeds of this policy would be held in trust for the baby until he/she is 18. This could fund education. You may wish to find a fee based financial planner who could discuss an estate plan for you.
If your husband leaves his job, he may be able to keep his life insurance coverage. He would have to pay for it himself. The same insurance company that covers him now might continue to cover him because of a "recognition of prior coverage." If your husband at some point is planning to leave this job, he should speak to the insurance company that currently covers him. (His company likely isn't the insurer, but instead contracts with an insurance company to provide a group policy.) With dependants involved, it's worth his time to investigate this possibility thoroughly.
It's really good that you have both thought about these issues and have communicated them to the people who would be affected.
For some clarity, there can be 3 people involved in a life insurance contract:
The policy holder, who holds, and pays for the life insurance contract.
The life insured: The person who's death triggers the payout.
The beneficary: The person who gets the payout.
An individual can be more than one of these things.
posted by thenormshow at 7:38 AM on October 14, 2016
Being an executor is challenging and difficult. In the event that both of you die, you may wish to choose a lawyer or trust service to be the executor. This is more expensive, but it relieves the guardian of your children of the burden of being an executor. In the event that both of you die, there is already significant legal work to be done to give the guardian authority over the children.
nthing you looking at getting more life insurance. You are unlikely to have a need for permanent life insurance, so term life insurance is preferable. You may wish to get two policies. Both would have the primary beneficiary as your husband. There can be a secondary beneficiary, if the first beneficiary is dead too. The first policy would have your estate as the beneficiary (or the guardian for the baby.) The second would have the baby as the beneficiary. The proceeds of this policy would be held in trust for the baby until he/she is 18. This could fund education. You may wish to find a fee based financial planner who could discuss an estate plan for you.
If your husband leaves his job, he may be able to keep his life insurance coverage. He would have to pay for it himself. The same insurance company that covers him now might continue to cover him because of a "recognition of prior coverage." If your husband at some point is planning to leave this job, he should speak to the insurance company that currently covers him. (His company likely isn't the insurer, but instead contracts with an insurance company to provide a group policy.) With dependants involved, it's worth his time to investigate this possibility thoroughly.
It's really good that you have both thought about these issues and have communicated them to the people who would be affected.
For some clarity, there can be 3 people involved in a life insurance contract:
The policy holder, who holds, and pays for the life insurance contract.
The life insured: The person who's death triggers the payout.
The beneficary: The person who gets the payout.
An individual can be more than one of these things.
posted by thenormshow at 7:38 AM on October 14, 2016
To spare hassle, you might want to see if you can set up your bank accounts to be what is called TOD/POD--transfer on death/pay on death. This will allow the beneficiary to claim the accounts relatively quickly and without going through probate, which may be handy in a difficult time like bereavement. If your bank accounts are not already joint, you can make your spouse the primary beneficiary and then the husband's sister the secondary beneficiary. If already joint, make the sister the primary beneficiary. This assumes that you have confidence that the husband's sister will use those funds for dealing with the immediate needs of the child, but since you are making her the guardian I would hope that would be the case. (You should, obviously, inform her of the existence of these accounts, since she would have to ask for release of the funds, and at the time you can clarify that the funds are for the child.)
posted by praemunire at 10:19 AM on October 14, 2016 [1 favorite]
posted by praemunire at 10:19 AM on October 14, 2016 [1 favorite]
After having dealt with a couple of deaths at work where the primary beneficiary of the life insurance was a minor child may I suggest some sort of trust that his child becomes the trustee of when he hits 18 but under 18 has a specific named trustee? (or pick any age)
It was a LOT of extra paperwork and setting up a way to get the pay out to the child and they ended up having to wait an additional 3 month because of all the extra work.
posted by magnetsphere at 10:48 AM on October 14, 2016
It was a LOT of extra paperwork and setting up a way to get the pay out to the child and they ended up having to wait an additional 3 month because of all the extra work.
posted by magnetsphere at 10:48 AM on October 14, 2016
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posted by machine at 6:32 AM on October 14, 2016