Although I love writing about financial markets, being a wealth manager is about more than just investing. As my wife and I patiently await our second child due in August, I though it made sense to discuss some of the financial planning aspects of having a child.
College 529 Plans
With interest rates near zero, it makes sense to look for other options when saving for college expenses. The most popular vehicle in the area is a 529 Savings Plan. Funds deposited are invested in the stock and bond markets and earnings grow tax deferred. Withdraws are tax free if used for qualified expenses. Your state may even offer a tax deduction on your contributions. There are other options for college savings as well, please consult your trusted advisor before making a decision.
Now that you have a child to take care of, it makes sense to have some life insurance. If you were to die suddenly, the income you generate from your job will disappear – leaving your spouse and child to support themselves. If you have life insurance, the death benefit will go to your spouse tax free. Your spouse can then use those funds to replace the income lost due to your death. Both you and your spouse should have some form of life insurance, even if you are young and healthy – you never know what could happen. There are many forms of life insurance so be sure to consult a trusted advisor about your options.
Many couples do not have a will, and having a child is a great time to get one done. A will should state who gets your probate assets when you die. Now that you have a child, your will must be changed so that there is mention of children. Also in your will you will state who takes over guardianship of your children if both you and your spouse die. This is very important. If both you and your spouse were to die without a will, depending on your state of residence, your family members would have to apply for custody of your child. The last thing you want is both sides of the family fighting over custody of your child.
While you are establishing a will, you may also want to work on neglected estate planning for you and your spouse. Both of you should have an established Property Power of Attorney and Healthcare Power of Attorney. If you do not have these named, now is a great time to get this done. You may also want to discuss establishing a Trust for your child. A good Estate Attorney will be able to get all of this done for you at a reasonable price. It also helps to have your financial advisor in the meeting as well – your advisor may be able to address some important issues on your behalf.
Whether you are having your first child, or you already have children, there is no better time than right now to get the items on this list checked off. You never know what life will bring, and luck favors the prepared. Feel free to contact me with any questions.
*The above article is informational in nature only and is not a recommendation to buy or sell securities. All information is gathered from sources believed to be reliable, but neither Charles Brown nor Ausdal Financial Partners, Inc guarantees the accuracy of the information. All investments carry a degree of risk. Individuals should consult with their tax and investment professionals before making changes to their investment portfolios.