Having a child comes with a whirlwind of emotions. Your world is turned upside-down and now your life is about your children and not you. There is an instant reality check when your child is born. Now you’re living for someone else and now you don’t have much time for anything else. With your life now instantly chaotic, it’s easy for parents to overlook easy financial tips that they should put in place today.
Update Your Estate Planning: With the ever-changing family dynamic, there are other family members that may play an important role in the raising of your child. It’s important to note who plays an active role in your child’s life, and if the parents are not married, they do not have the protections that a surviving spouse would have. It’s important to speak to an estate planning lawyer to create estate planning documents where you can designate a spouse or partner as a guardian for children if you were to pass.
Check Your Beneficiaries: Parents can put a spouse, partner or child as beneficiaries on bank accounts and savings accounts with a POD (payable on death) form and on regular investment accounts with a TOD (transfer on death) form that you can typically get from the institution holding the account. Ohio allows parents to add beneficiaries to real estate and vehicles. Having these beneficiary designations allow these assets to pass on without the cost, delay and lack of privacy involved with the probate process and with much less cost than a trust.
Update or obtain a life insurance policy: It is amazing how many insurance policies are available to parents. It should be relatively easy to obtain a life insurance policy on a minor because their life expectancy is much longer, and once the child turns 18, there are a number of options available. There are all types of term life insurance policies, so it’s very important to contact a financial adviser or research which insurance plan is right for your family.
Create a Trust: A lot of clients do not realize there are many types of trusts that can be custom-tailored to the person creating a trust. In Ohio, there is the Uniform Transfers to Minors Act (UTMA) that allows a minor to receive gifts — such as money, patents, royalties, real estate and fine art — without the aid of a guardian or trustee. A UTMA account allows the gift giver or an appointed custodian to manage the minor’s account until the latter is of age. UTMA also shields the minor from tax consequences on the gifts, up to a specified value. Minors cannot directly receive the money, gifts and other property and it is placed with a custodian to manage the minor’s account. Without a trust to direct who controls the money, it’s possible that the court can appoint someone not of your wishes. If a parent has a trust, they can then direct how and who can manage the money until their child turns the age of majority. The trust can direct how investment accounts, retirement plans and bank accounts are paid out.
Set up a Family Budget: There are a whole lot of expenses when it comes to children and raising them. Inevitably, they get more and more expensive as they get older. Parents have to consider paying bills, education expenses, student loans, savings plans and college plans just to name a few. Take five minutes a day to set up your budget and how you’re are going to allocate personal finances and pay off high-interest debt, such as credit cards. This allows parents to plan for the future, but it’s also a teachable moment for your kids.
In our ever crazy parenting world, we tend to believe that we just don’t have time to plan. Taking just five minutes of the day can help your family in the future.
Parenting is overwhelming and breaking down tasks such as calling an estate planning attorney to discuss setting up a will really doesn’t take as long as you think. Try breaking down the above five tips for the next five months and your family will thank you for it.
Amy Turos brings extensive experience in family law, estate planning and motor vehicle accidents throughout Portage, Trumbull, Geauga and Summit counties.
Photo: Amy R. Turos, attorney at law, used with permission from Amy R. Turos