Estate Planning for New Parents: What to Do After Having a Child

Introduction

Estate planning for new parents is one of the most important — and most overlooked — financial steps after welcoming a child. While many families focus on nurseries, car seats and child care, legal and financial planning often gets delayed.

What Changed and Why It Matters

Young couples who welcome their first child often spend months preparing the nursery, buying car seats and figuring out child care. What many don’t prepare for is the legal and financial responsibility that comes with having someone depend on them.

That’s a mistake, according to Harry Margolis, who says the birth of a child is one of the most important moments for families to create or update an estate plan.

The issue isn’t simply who inherits assets if something happens to the parents. It’s also about who would raise the child, who would manage the money left behind and whether surviving family members would have enough financial protection.

What This Means for You

If you recently had a child, experts say several items should move to the top of your financial checklist:

• Create or update a will
• Name guardians for minor children
• Consider naming a trustee to manage inherited money
• Review whether a trust makes sense
• Buy adequate term life insurance
• Put powers of attorney and health care directives in place

Margolis said many young parents delay these steps because they assume estate planning is only for wealthy households or retirees.

“This is probably one of the two classic times that people do estate planning — when they have a child and when they retire,” he said.

Why Guardianship Matters

The biggest issue, Margolis said, is straightforward: parents now have a dependent.

“The real issue when you have a child is that you now have a dependent, someone you’re responsible for,” Margolis explained. “What happens if you’re not around?”

One of the first decisions parents should make is naming a guardian.

That designation is typically included in a will and identifies who would care for the child if both parents die or become unable to do so.

Margolis acknowledged that the choice can be emotionally difficult because no replacement caregiver will mirror the parents exactly.

Still, he said making the choice is far better than leaving courts and relatives to sort it out during a crisis.

In many states, parents can also name a temporary guardian through a separate document in case they become temporarily incapacitated because of illness or injury.

Managing Money for Children

Money management is another issue young families often overlook.

For families with modest assets, Margolis said a simple provision in a will naming a trustee may be enough. That person would manage funds for children until they reach a specified age.

Families with greater wealth or more complicated financial situations may benefit from creating a separate trust that spells out when and how children receive money.

That flexibility can matter. Some parents may prefer children receive distributions gradually rather than inheriting everything at age 18 or 21.

Why Life Insurance Matters

Margolis also argued that life insurance may matter even more than formal estate planning documents for many younger households.

“If you’re younger, you probably don’t have a lot of assets yet,” he said. “But you want to leave something for your children or your spouse in case you’re not there.”

For many families, term life insurance offers the most affordable way to provide that protection. Policies purchased while individuals are young and healthy are typically less expensive than coverage purchased later in life.

Don’t Overlook Incapacity Planning

Beyond wills and insurance, Margolis said all adults should have basic incapacity planning documents in place.

Those documents generally include a durable power of attorney, which authorizes someone to manage financial matters, and a health care proxy or health care directive, which identifies who can make medical decisions if a person becomes incapacitated.

Estate Planning Should Be Updated Over Time

One problem Margolis sees frequently in his elder law practice is outdated documents.

Many retirees created estate plans decades earlier when their children were young, but never updated them to reflect changes in family relationships, finances or tax laws.

“A lot of them have documents they executed 40 years earlier that are now totally out of date,” he said.

That creates another lesson for younger families: Estate planning is not a one-time event.

Marriage, children, divorce, deaths, moves to another state and major financial changes can all trigger the need for updates.

For new parents already juggling expenses and exhaustion, estate planning may feel easy to postpone. But delaying those decisions can leave families exposed if the unexpected happens.