A Parent's Guide to Estate Planning
You don’t have to be wealthy to benefit from an estate plan.
In This Article
Becoming a parent comes with a seemingly endless list of responsibilities: child care, saving for your baby’s future, and so much more. Often overlooked among all those to-dos is the need to create an estate plan to ensure your wishes are carried out and your children are cared for if something happens to you.
Estate planning isn’t just for the wealthy. It’s for anyone who wants to protect their family and provide clear instructions for the future. Without a plan in place, decisions about your assets, medical care, and even who would care for your children could be left to the courts.
And you shouldn’t wait until you approach retirement age to create one. The best time to start is now. Here’s what you need to know.
What is estate planning?
Estate planning is the process of creating legal and financial documents that outline how your assets should be managed and distributed if you become incapacitated or die. It serves two key purposes for parents: protecting your children and ensuring your family's finances are handled according to your wishes. It can also help reduce confusion, delays, and potential conflicts among loved ones during an already difficult time.
While the cost of a full estate plan drawn up by an attorney will depend on your needs and location, it will typically run anywhere from $2,000 to more than $5,000, according to the National Council on Aging. It’s not a small fee, but if you can afford it, it can be worth the sense of security.
What documents does an estate plan include?
Estate planning can feel overwhelming, especially when you’re already juggling all the other decisions that come with having children. But knowing the specific documents you’ll need can help you get started.
Most estate plans include a handful of key documents that work together, though the exact contents of each document will depend on factors like your family structure, finances, and long-term goals.
A will
A will outlines how you want your assets distributed after your death and names an executor to carry out those wishes. For parents of young children, one of the most important functions of a will is naming a guardian. Without a will, a court may decide who becomes your child's guardian.
A will typically goes through probate, a court-supervised legal process that settles an estate. “This process validates the will, officially appoints the executor, settles outstanding debts, and facilitates the legal transfer of assets, says Minoti H. Rajput, CFP, who has years of experience recommending estate plans as founder Secure Planning Strategies.
A durable financial power of attorney
A financial power of attorney, often referred to as a POA, allows someone you trust to make financial decisions on your behalf if you're unable to do so yourself—typically if you suffer from a sudden injury, illness, or cognitive decline. That person may be able to pay bills, manage investments, access bank accounts, and handle other financial matters depending on the authority granted in the document.
You can name more than one person to your POA, either as co-agents (who act jointly) or successor agents (where one acts as a backup). Note that if a successor steps up because the primary agent has become incapacitated or dies, they will need to present proof of that (such as a death certificate) alongside the POA.
Banks don’t take POAs lightly—some may require the representative to show evidence of the principal’s (the person who had the document drafted) incapacitation (such as a doctor’s note). POAs become invalid when the principal dies.
An advance directive and healthcare proxy
An advance directive refers to legal documents that state your medical wishes before you lose the capacity to make them known. These typically include:
A healthcare proxy: This is a healthcare POA, which appoints someone you trust to make medical decisions on your behalf.
A living will: This may specify the types of medical treatment you would or wouldn’t want in certain circumstances, such as decisions about when and how to prolong your life.
A revocable living trust
Misconceptions often prevent families from exploring trusts. Some people assume their estate isn't large enough to justify a trust, according to Rajput. Others worry about legal costs or believe beneficiary designations on retirement accounts and life insurance policies make additional planning unnecessary.
But you don’t have to be ultrawealthy to have a trust. And while not every family needs one, many parents can benefit from one.
"Trusts offer considerable flexibility, avoid probate, and allow the estate to be settled privately," Rajput says. “When families have minor children, children with special needs, large estates, or complex estates, they may want to consider living trusts.”
A revocable living trust allows you to place assets into a trust that you maintain full control of while you’re alive. When you die, the assets are automatically retitled in the name of the trust’s beneficiaries, thereby skipping the probate process (and saving everyone time and money).
What are common estate planning mistakes?
Estate planning isn’t a one-and-done task, which makes it easy to miss things here and there. People often fail to coordinate estate planning documents with financial accounts and to title beneficiary designations properly, Rajput says.
That’s important because many financial accounts pass directly to beneficiaries and don’t go through probate. These often include:
401(k) plans
IRAs
Annuities
Certain brokerage and bank accounts
Because these assets pass according to beneficiary forms on file, it’s important to review them regularly and make sure they align with your broader estate plan.
You should also update documents after changes in personal circumstances or tax laws, Rajput advises. Marriage, divorce, the birth of a child, a move to another state, or significant changes in finances can all warrant a review of your plan.
Rajput also cautions against leaving children access to inheritances too early or, conversely, delaying access longer than necessary. Thoughtful planning can help strike a balance between protecting assets and giving children financial independence at appropriate stages of life.
When should parents create an estate plan?
The best time to create an estate plan is as soon as you become a parent—or even before your child arrives.
While estate planning may not feel urgent amid the demands of caring for a baby, putting key documents in place can provide peace of mind that your family would be protected if the unexpected happened.
You don’t need a massive estate to benefit from planning. For most parents, the goal isn’t simply passing down wealth. It’s ensuring that the people you love most are cared for according to your wishes.
That’s something every family can benefit from.
