As a Cincinnati estate planning attorney, I work with clients in all stages of life, including those who are starting a family or adding to their family. I thought this article was a good, quick summary of some things to consider if you are in that “stage”. Especially the section “Expect the Unexpected” that includes updating (or maybe in your case, creating) your estate plan. This article appeared on January 28, 2022, in the News-Herald and was written by Shawn Bumbardner.
If you are expecting or have recently added a child to your family, you have likely begun making big plans for the future. Expanding your family often has a way of putting your priorities into perspective. One of the most important aspects to consider while preparing for your new arrival is how your financial habits, responsibilities, and goals might change.
Here are seven things to consider:
Think About Lifestyle Changes
How will your baby impact your day-to-day activities? Incorporate the cost of family outings and increased expenses into your budget to avoid surprises. Keep in mind that supporting your children in their hobbies, such as a traveling soccer team, music lessons, or private coaching, may take additional investment. If your ideal lifestyle involves a new car or home, consult a professional about the pros and cons of making the move today – or further down the road.
Consider Child Care Expenses
Care.com’s 2021 Cost of Care Survey found that more than three-quarters of parents in the U.S. spend 10% or more of their income on child care. And this cost is on the rise. In some U.S. states, the cost for one year of care can be more than one year of college. So, whether you choose daycare, a nanny, an au pair, an after-school sitter, or a combination of options, make planning for this expense a priority.
Reevaluate Your Career
The arrival of a new child may cause you to think differently about your career goals. Perhaps you want to earn a promotion, seek a job with a higher salary or better benefits, or pursue continuing education. Maybe you or your spouse are ready to reduce your hours or become a stay-at-home parent. If you are thinking about changing your job status, evaluate how the move may affect your paycheck, retirement savings, and benefits.
Prepare For Tuition
While the cost of child care may decrease if you choose to send your child to public school, private elementary or secondary school often comes with a price tag. Furthermore, the cost of college continues to rise at a pace faster than inflation. Tax reform expanded the use of 529 plans, a saving option most commonly used for higher education expenses. You may now withdraw up to $10,000 federal income tax-free per beneficiary, per year to pay for kindergarten through 12th-grade tuition at a public, private or religious school. And, if funding college tuition is important to you, know it’s never too early to start saving.
Prepare For the Unexpected
Unexpected events can affect your finances at any time. Resolve to build or maintain an emergency fund that could cover three to six months of expenses, in addition to prioritizing your retirement savings. After your baby arrives, update your estate plan and insurance coverage (e.g. medical, life, disability policies) as necessary.
Ponder Family Values
Start thinking about how you want to teach your child about financial responsibility. Will you give him or her an allowance? What is your vision for giving birthday presents, holiday gifts, vacation souvenirs, and other items to your child? What money values do you want to pass down? Being intentional early can help set clear expectations and ensure you and your spouse are on the same page.
Plan for Your Family Bucket List
Many parents dream of showing their children new places and allowing them to have a variety of experiences. Think about what activities matter to you and incorporate them into your financial plan. Taking an annual vacation, owning a vacation home, buying season tickets to your favorite team, or purchasing a boat are common goals for many families.
Starting or adding to your family is a wonderful experience. It is also an added responsibility. Creating or updating your estate plan to include these new family members is the right and loving thing to do. I can help. Please visit my website https://davidlefton.com/services/ to learn more. And remember, it is always best to engage an experienced estate planning attorney.
For more information about estate planning, probate, or trust administration in Cincinnati (and throughout the rest of Southwest Ohio) and to review free resources regarding estate planning, probate, or trust administration, visit my website https://davidlefton.com/ If you have questions regarding this article or a particular legal matter, feel free to contact me at 513-399-PLAN (7526). David H. Lefton is an Estate Planning and Probate Attorney. He is a partner in the law firm of Barron, Peck, Bennie & Schlemmer.
Source: News-Herald, January 18, 2022, Written by Shawn Bumgardner