Congratulations! While you’re planning for the arrival of your child, consider these essential topics. If you’re already a parent, give yourself a double check. Feel more confident that you have a plan that fits your family’s needs today.
Learning Points
Review Your Estate Plan
IF YOU ARE PLANNING FOR YOUR FIRST CHILD, there are several tools for you to consider in your estate planning, including a will, durable power of attorney, and advance directives.
- HIPAA Waiver: this allows the people you name in the document to obtain access to your medical records if you’re incapacitated.
- A FINANCIAL POWER OF ATTORNEY (POA) and HEALTHCARE POWER OF ATTORNEY: these documents give another person the legal right to do certain things for you. When that person serves in their POA capacity on your behalf, they are considered to be acting as your agent. Now, you can choose what powers to grant your agent by defining their role in the POA document. A financial POA allows others to manage your financial affairs if you become incapacitated. Whoever you designate with a financial POA, those powers terminate at your death. A healthcare/medical power of attorney allows the person you designate to make health care decisions for you. For example, your healthcare POA can allow your agent to make treatment choices, surgery elections, long-term care facility selection, organ donation, and authorize your autopsy.
- A DURABLE POWER OF ATTORNEY ALLOWS the person(s) you designate to make decisions on your behalf, even if you become ill. Whereas a springing durable power of attorney can provide additional flexibility. It only activates if you are deemed incapacitated. So, when your intent is to designate your back-up decision-maker in the event of your incapacity, then a durable power of attorney is an option to explore.
- Your living will is another advance directive that allows you to express your wishes regarding end-of-life care.
- A will is a legal document that outlines how you want your assets distributed after your death. It can also appoint a guardian for your minor children. A will is a revocable instrument. As such, you can amend, alter, and revoke your will.
These estate planning tools can protect you, and your family, if you become incapacitated or pass away.
Your estate plan should organize and express your wishes for how you want your assets managed and distributed before and after your death. Your estate plan should memorial how you wish for your children to be cared for, whether by trusted family member, or close friend.
Before your child arrives, consider whether you want to establish a trust for you and your spouse, or for your child. At the most basic level, the purpose of your trust can be to:
- provide for the continued management of your assets during your lifetime in the event of your disability,
- avoid the expense and delay of probate at the time of your death, and
- provide for the disposition of your assets after your death in accordance with your wishes.
While it can be tempting to tackle your initial estate planning through a DIY approach or through a low-cost internet vendor, consider first consulting with an attorney specializing in estate planning in your state.
To get started, consider evaluating estate planning attorneys who are affiliated with the local estate planning council in your area. The right estate planning attorney for you can help create legally enforceable estate planning documents for your specific situation.
Apply for a Social Security Number
AS YOU START PLANNING FOR YOUR FIRST CHILD, you’ll want to apply for your child’s social security number while you’re in the hospital. It can be an easier experience working with staff to start this process at the hospital rather than dedicating time later.
According to the Social Security Administration (SSA), the easiest way to get a Social Security number (SSN) for your newborn is to apply when you provide information for your baby’s birth certificate in the hospital.
If you wait to apply for a number at a Social Security office, there may be delays while the SSA staff verify your child’s birth certificate.[i]
After you’ve submitted your application, you should anticipate receiving your child’s social security number paperwork and card within 3 – 9 weeks. There is currently a 1- to 6-week processing delay, which depends on where you live, plus an additional 2-week mail delay.
If you are a resident of Missouri, the current turnaround timing is ~3 weeks.
Order Your Child’s Official Birth Certificates
IF YOU ARE PLANNING FOR YOUR FIRST CHILD, you’ll want to order your child’s official birth certificate. Your child’s hospital-issued birth certificate can be a cherished memento. Unfortunately, it won’t be accepted as an official birth certificate when you need it as proof of U.S. citizenship. Plan to order 2-3 official birth certificates for your child.
You’ll need an official government birth certificate for things like the following:
- Applying for a passport
- Enrolling in school
- Obtaining a driver’s license
- Opening a bank account (for a minor)
- Certain sports activities
Update Your Tax Withholdings
IF YOU ARE PLANNING FOR YOUR FIRST CHILD, set a reminder on your calendar update your withholdings on your IRS Form W-4 after your child arrives.
Specifically, you’ll want to correctly reflect any eligibility for child-related tax credits in Step 3 of the form.
Because this topic, like so many others in financial planning, intersect with the world of tax, make sure you coordinate with a qualified tax professional.
Update Health Insurance Coverage
IF YOU ARE PLANNING FOR YOUR FIRST CHILD, and need to update your health insurance coverage after your child is born, most health insurance companies need you to update this information within 30 to 60 days.
Ideally, try to update your coverage after you receive your child’s social security number.
This will help you during tax filing time next year when you receive your Form 1095-C / Employer-Provided Health Insurance Offer and Coverage. Specifically in Part III listing all the covered individuals of your employer’s health plan.
On a practical note, you can set a personal calendar reminder to update your health insurance coverage through your employer’s online benefits portal.
Obtain a Passport
IF YOU ARE PLANNING FOR YOUR FIRST CHILD, and considering traveling internationally with your child, you’ll likely need to obtain a passport for them. Talk with friends and family about their recent passport experiences to learn more about the most convenient passport acceptance facility locations. You can also search for the nearest facilities here.
Before you stop pop-in to the preferred passport office in the hopes of submitting your passport, consider making an appointment at your preferred passport office and obtaining your passport photos ahead of your visit.
When setting your appointment, the passport staff oftentimes have a sense of the better places to obtain a passport photo.
Passport photos for 1-month olds can be tricky, but they are doable.
The U.S. Department of State has online resources to help you prepare the right paperwork for you and your family. It’s also worth noting that you’ll need a check or a money order. No credit cards.
If you submit an official birth certificate with your passport application, it will be returned to you.
Open and Fund 529 Account for Future Education Expenses
A section 529 plan – also known as a “qualified tuition plan” – is a tax-advantaged investment program designed to help families save for higher education expenses. These plans are sponsored by states, state agencies, and educational institutions.
IF YOU ARE PLANNING FOR YOUR FIRST CHILD, 529 accounts offer a flexible way for you to save and invest for a variety of educational goals, like:
- Kindergarten through 12th grade (K-12)
- Trade schools
- Undergraduate
- Qualifying graduate schools
Today, there are two kinds of 529 plans:
- Education Savings Plans: most education savings plans are available to everyone. A few have residency requirements for the accountholder and/or the beneficiary.
- Prepaid Tuition Plans: While these typically have residency requirements, one notable exception is a prepaid tuition plan sponsored by a group of private colleges and universities.
There is no “one-size fits all” 529 strategy. The way you approach selecting, opening, and managing a 529 account depends on your personal facts and circumstances. Coordinating with a qualified tax advisor can be an important layer to successfully planning and executing on your 529 strategy, too, and should not be overlooked.
Here’s a simple framework to follow:
- What state do you live in?
- When does your 529 beneficiary need to use the money?
- What kind of educational need, or needs, will the 529 fund?
Like most financial planning opportunities, education funding requires personalizing your plan and considering the interplay of all the details of your financial life. In many situations, parents will want to prioritize funding their own retirement goals over their children’s education funding goals.
If you are interested in learning more about 529 accounts, “Elevate Your Understanding: Today’s 529 Account Essentials“, explores the essential details of these education funding accounts.
Freeze Your Child’s Credit Reports
IF YOU ARE PLANNING FOR YOUR FIRST CHILD, consider freezing their credit report after your child has a social security number. This one can feel like an extra credit project for families.
Each credit bureau – Experian, TransUnion, and Equifax – has its own form that you’ll need to complete and physically mail to them. Each bureau’s form and/or process varies. The bureaus typically require, at a minimum, a copy of your child’s social security card and birth certificate. For example, Experian requires the following:
- Printed form
- A copy of your driver’s license or another government issued identification card, such as a state ID card
- Proof of your address, such as a copy of a bank statement, utility bill, insurance statement
- A copy of your child’s birth certificate
- Proof of guardianship, if not named on child’s birth certificate
- A copy of your child’s Social Security card
Sticking to the theme of your child’s credit, if you’re considering adding your minor child as an authorized user of your credit card, it’s unlikely to help them build credit.
That’s because some major credit card issuers do not report the authorized user credit history of minors to the Credit Reporting Agencies. There are other credit building tools available, but they’re outside the scope of what most parents need to consider.
There will be other opportunities later in your child’s life to help them develop strong money habits (and establish a health credit score).
Summary Checklist: Planning for Your Child
Below is a summary of essential planning items to consider if you are planning for your first child. Even if you’re already a parent, give yourself a double check with the checklist below:
The Next Step
When you know who and what are truly important, you can create incredible clarity about your spending and saving.
Clarity to confidently spend on things that matter. Clarity to avoid spending your hard-earned resources on things that aren’t aligned with what you want in life.
As your financial planner in Saint Louis, we can help you plan for the future and enjoy the present moment.
Start feeling more confident that you are making progress toward your savings priorities and planning for your first child. Once you know which planning items you want to tackle for your new baby, set aside time on your calendars to start making progress on what you want to achieve.
Proactive and open collaboration with your financial, tax, and estate planning professionals can help you work towards your financial goals. Working with your financial planner in Saint Louis can provide you with the right mix of accountability, collaboration, and long-term thinking.
If you’re unsure about your next step, let’s talk.
Disclosure
This commentary is provided for educational and informational purposes only and should not be construed as investment, tax, or legal advice. The information contained herein has been obtained from sources deemed reliable but is not guaranteed and may become outdated or otherwise superseded without notice. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decision.
[i] Social Security Administration. How long does it take to get my child’s Social Security number?