Pick out crib bedding, enroll in childbirth classes, choose a name … preparing for baby’s arrival includes a lengthy to-do list of all sorts of exciting hustle and bustle. But laying the groundwork for successful parenthood isn’t all fun and games. There are a few tedious—yet imperative—tasks that must be tended to as well. Somewhere between sign up for prenatal yoga and buy dress for the baby shower, be sure to carve out time to organize new parent-related paperwork so you can ensure your family is taken care of in the years to come.
Choosing life insurance
Should the unthinkable happen to you or your partner, it’s important to have a system in place that will allow your family’s financial well-being to remain relatively uninterrupted. Fortunately, a well-picked life insurance policy can provide just that. Raquel Lorenzo Murphy, Individual Life, Disability and Long Term Care Specialist for HUB International Northeast, suggests deciding how much life insurance you need based on “whether you want to replace your spouse’s income or simply have enough to pay off the mortgage and provide enough money for your child’s education.” You may decide to just cover the cost of living expenses, healthcare and schooling, or you may want additional insurance to allow your family to maintain the lifestyle to which they’ve become accustomed.
Writing a will
In addition to indicating how your property is to be divvied up, a will also provides instruction for the care of your child in the event of your untimely death. According to Cheryl A. Smith, CPA, president of Compass Business Management in Fort Lauderdale, Florida, “A guardianship document is perhaps the most important document a family of minor children must have.” This component of your will specifies two things: first, the guardian of your child, and second, the guardian of her inheritance. Keep in mind that, in most cases, you and your partner will have separate wills. Thus, you’ll likely want to appoint your partner as the first-choice legal guardian in your absence; you and your partner will want to designate a second-choice guardian as well, should a tragedy occur in which you both become unable to care for your child. No parents want to confront the possibility that someone else may need to rear their child, but not taking the time to contemplate such tough circumstances and take care of the formalities accordingly will leave the decisions up to the courts, which may not make the same choices you would.
Saving for college
It’s hard to think about your baby going to college when she’s still the size of a grapefruit, but 18 years will fly by, and that first tuition installment will be due before you know it. Josh Andrews, the lawyer behind The Outsourced Associate in Birmingham, Alabama, encourages parents to “save early and save often.” He suggests working with a professional to determine a savings plan suited to your needs.
To begin saving for their children’s academic future, many parents turn to the popular option of starting a 529 Plan. “A 529 Plan is an education savings program authorized by the Internal Revenue Code that is operated by a state or educational institution, generally in conjunction with an investment company,” explains Andrews. “It’s designed to help families set aside funds for future college costs.” The dollars you invest are able to grow tax-free and won’t be taxed when withdrawn, provided they’re used for higher education. There are other benefits associated with 529s as well, including possible state tax breaks, low-maintenance saving, simplified tax reporting, beneficiary flexibility and grantor control.