As a young family, you spend your days chasing down missing stuffed animals, making snacks, trekking your clan from daycare to play dates to dance classes, and your nights are complete with bath time and bedtime stories. No doubt you have a lot on your mind and at the end of day, you are happy to say you survived. It's no wonder that some of life's necessities fall low on the priority list.
There's good news! To cover your bases and protect your family, young parents don't need anything fancy. A few simple steps can make the difference.
1. Get a Trust
You may be tempted to put this step on hold and wait until you have “more” assets and wealth to leave behind. However, for you as a young parent, a Trust is more about naming a guardian for your children. Should something happen to you as parents, the guardian you name in your Trust would step in and take care of your children. While that may seem unlikely that both parents would pass away at the same time, it's not a chance you need to take.
If you have a named guardian, that person would be give the authority, baring any serious reason they shouldn't, to take care of your child. If you haven't put a provision like this in place through a Trust, the court would have to choose someone without any guidance from you. Typically this is a family member, but that may not be who you would choose. But without the proper planning in place, the court would have no way of knowing what your wishes were. This decision could be very important especially if you are a blended family.
2. Get Powers of Attorney and a Living Will in place
Parents should have an advance health care directive (living will) and powers of attorney for health care and for finances. If an accident or illness strikes, these documents will make things much easier for your family to take of you.
A living will or advance directive puts in place your wishes for end-of-life decisions. This is commonly referred to as a “DNR,” and in Indiana allows you to make a choice regarding artificial food and hydration or feeding tubes.
In a power of attorney for health care, you give a trusted person the authority to carry out the wishes in your advance directive, and to make other medical decisions if you aren't able to do so.
A power of attorney for finances works much like your health care power of attorney, except it gives someone authority to make financial decisions and handle some transactions. This can be a big benefit to family members—your spouse might need quick access to your checking account to pay the mortgage, for example. Without a power of attorney for finances, a court order would be necessary for those you trust to assist you in these tasks.
But, you may be thinking, “I'm young and healthy. I don't think I need these sort of documents.” Although it may seem unlikely that you would be seriously injured or be in a situation that would require a power of attorney to act on your behalf, these documents are better put in place now rather than find out too late that they are needed.
3. Get Beneficiaries named for Retirement Accounts
One last simple step to take is to name beneficiaries for your retirement accounts--any IRA or 401(k) account you've opened as well as any life insurance policies and bank accounts. All you need to do is fill out a beneficiary form that can be provided by your employer or the account manager. If you want to change it later, you can.
By naming a beneficiary, you make it possible for the funds in that particular account to go directly to the person (or persons) you name, upon your death, without the court being involved or going through Probate. This saves time, hassle and money for your family.
Each of these simple steps can make a difference for your family - yes, even a young family! You can update these documents should your circumstances change or as your family grows.