There’s so much to think about when becoming a parent – finances and legacy planning might be the last thing on your mind. But whether you have a legacy plan in place–and just need to make some minor updates–or you’re starting from scratch, now’s the time to set up the following basic legacy provisions in case the unthinkable happens:

Name Guardian(s) for Your Child

This is the big one. In the event that something happens to you and/or your spouse/partner, and you’re no longer able to care for your child, you have the ability in your will to name a legal guardian, or a pair of legal guardians, to raise your child on your behalf. You may want to consider a few factors when selecting this person or couple:

• Age – Your parents (the child’s grandparents) may be an excellent choice to act as guardians now….but what about when your child is in their mid-teens and your parents are no longer as active? Similarly, maybe you have a younger sibling who loves to babysit your child…but isn’t ready to take on parenting quite yet.  
• Location – Will they be able to ensure as much consistency as possible for your child? Or would your child have to adjust to a new school district, state, or even country in the case of your untimely death or incapacity? 
• Parenting Style – Does the person/couple have similar beliefs when it comes to religion, discipline, entertainment, and other key parenting decisions?
• Family Size – Maybe you have a friend whose lifestyle aligns with yours, and who lives in your school district, but has many children. Would your child(ren) receive the best care in this household? 

Of course, you’re the best parent for your child, and this is all about planning for a worst-case scenario. You’re trying to find the best balance of these factors and select someone who will keep your child’s best interests in mind. Keep in mind that you can name a contingent guardian, in case the primary guardian(s) is unable or unwilling to serve. You may also add a “minimum age” when someone can step in as a guardian, or an “expiration age” after which the guardian nomination is no longer needed or relevant. 

If you die or become incapacitated, and there is no guardian named, your state will make the decision. This can take a long time, and the state may not choose the same person you would. Even if you’re only setting up a basic will in order to get a guardian in place, and you do no other legacy planning at this time, it’s well worth the time and basic legal fees!

Make Your Child Beneficiary on Key Accounts

There’s a lot you can do to ensure your child’s financial security in your absence. Talk to your financial advisor or account administrators about naming your child a beneficiary–or contingent or secondary beneficiary, after your spouse or partner–on your retirement accounts, annuities, mutual funds, and/or life insurance policies. You may also be able to add them as a beneficiary on your checking or savings account(s). 

Depending on the account, and the age of your child at your death, these designations may bypass probate and get settled quickly. If your child is still a minor at the time of your death, and unable to manage money on his/her own, the court may decide that these funds will be overseen by the guardian, or by a designated trustee put in place for this purpose. This brings us to our next point:

Consider Setting up a Minor’s Trust

A Minor’s Trust is set up for the care and keeping of an individual heir or group of heirs under the age of 18. Assets are transferred into a trust and put under the oversight of a trustee (someone you designate) until the child or children reach a specified age: usually 18, 21, or 25. 

Similarly, a “spendthrift trust” can be set up to benefit an adult heir, but still has a trustee in place. This is often used for an heir who doesn’t manage money well, has an addiction, or lives in a situation that would make it difficult for them to make significant financial decisions. Or it can simply be a way to set some parameters or “checks and balances” around how and when an adult heir can use the funds. 

Once a trust is set up, it can be used to funnel funds from the sale of your home and assets, investment accounts, or life insurance proceeds into to keep your estate simple and ensure the wellbeing of your child(ren).