Having a baby means so many new decisions and responsibilities from choosing a name to registering for MCC membership. But inevitably issues such as Wills, superannuation, life insurance and trusts also need to be considered. While arguably for some not as important as decisions on a name, these issues are in fact essential. Children are completely reliant upon us to look out for their welfare and best interests, and just like we need to feed and nourish them while we are able, estate planning is an important responsibility associated with caring for your new family – as we may not always be there or be able!
Your new Will
It doesn’t really matter what your financial situation is – you still need a Will to make provision for your new child. The reasons are clear when you ask a few simple questions;
- How are your assets going to be distributed?
- Who is going to care for your child should something happen to you and your partner?
- Do you have a guardian in mind but have never actually spoken to them or specified how you want your child raised, what school or religion would you prefer, what about living arrangements or travel?
Funding child’s future
No “one way suits all” but the aim is to plan for the financial needs of your family and to remove the financial stress and burden on your remaining spouse, parents and/or guardian. You need to estimate costs such as clothing, education, food, medical…etc and start planning how to meet these costs.
There are two options here, either you nominate a guardian or the court will do it for you!
The benefit of you making this selection is that that you know the person and how they are likely to raise your child. In contrast for court appointed guardians, in the first instance the courts are likely to default to a family relative who is financially able to care for your child even if they may not actually make the best parent.
Insurance & Superannuation
Now that you have an additional family member it’s a good time to review what you have stated on insurance and superannuation in terms of beneficiaries. Generally, the beneficiary you chose when you originally set up these policies may not be legally binding which may be a problem if your child is part of a blended family. When looking at this issue keep in mind that both your spouse and yourself, may both be deceased and superannuation and insurance providers are not bound by your Will. If you name a minor child as a policy beneficiary it would be important to consider also naming a trustee to manage the money on your child’s behalf.
Working through the requirements of providing for your young child is the first step in your estate planning, but there is little point in ensuring that the financial resources are available if you don’t also plan for how these will be managed. If saving tax or protecting your assets are important then these trusts are worth considering when it comes to managing the care and welfare of your child.
Your child will need to rely on whatever income and capital you can put in place today so that they can enjoy the lifestyle that you want for them in the future. Often we are unable to accumulate the necessary capital without the assistance of insurance which is why this is a necessary part of a considered estate plan. There are many types of insurances available starting with the more day to day being health insurance to hopefully the more distant being life insurance. It is important to consider all eventualities as sometimes people become permanently disabled and this can be financially crippling, at times even more so than death due to the potential ongoing financial and emotional stress involved.
If you would like to discuss your estate plan or explore further what’s involved in putting one together please contact Paris Financial on 03 8393 1000.
Steve Wildes, Partner, Paris Financial