Whenever we’re working with clients, we always tell them to contact us whenever a big financial decision or life event occurs. Even events that can feel very personal can have significant financial implications.
Today, for example, we’re going to review the top 4 things to do after welcoming a new child to the family. So, if you or someone you know is currently expecting, just had a child, or adopted a child, feel free to pass along these 4 tips:
1. Update your health insurance – Typically you have about a 30 day window to add the child to your health insurance policy, so you want to act quickly in notifying your insurance company and making that adjustment to your policy. At the same time, you may want to evaluate whether your current health insurance coverage still meets the needs of your growing family. When you give birth to a child or adopt a child, that’s considered a special or qualifying event, which means you can make changes to your health insurance policy outside of your standard open enrollment period.
2. Adjust your beneficiaries – If you’re married, generally speaking your spouse would remain the primary beneficiary on all your accounts and policies. However, you may want to update your contingent beneficiaries to add the new child. That way, if something ever happened to both you and your spouse, those assets would then pass onto the child. The other alternative is to keep your spouse as your primary beneficiary but then make it a “Per Stirpes” designation (if that’s an option available to you). Per Stirpes indicates that the beneficiary’s share of the assets should then go onto his or her own heirs. This would essentially cover your new child and any other future children in the same way.
3. Update your estate plan – First of all, if you don’t currently have any estate planning documents in place, then you definitely want to make that a priority after having or adopting a child. If you already have estate planning documents, then you’ll want to update them with the arrival of this new child. Not only will this provide you with the opportunity to adjust your Will to ensure that all assets pass onto the child at the passing of you or your spouse, but you’ll also be able to appoint the child’s Guardian which is so important.
4. Start an Education Savings Account – Lastly, if paying for your child’s education is a priority, you may want to open and fund an educations savings account, such as a 529 plan. If you’re able to, set-up automated monthly payments for forced savings to this account. Additionally, when it’s your child’s birthday, you can ask family and friends to make contributions to this account rather than buying the child a toy or gift. If you start this account when the child is first born, you’ll have time and the power of compounding interest on your side. You’ll be surprised to see what the account value is by the time you go to withdraw funds.