The Definitive Legal and Financial Checklist for New Parents
Becoming a parent for the first time brings a lot of changes, some are more welcome than others. If you have a new baby, you may be experiencing bliss while in the throes of sleep deprivation or anxiety, and if you have adopted a child who is already past that stage, you may be helping your child (and yourself) adapt to big changes.
If you have a couple of minutes, it is a good idea to organize a few things—materially, financially, and legally. This checklist can help you take care of some of the most important legal, financial, and planning issues that you should be aware of as a new parent.
1. Birth Certificate & Social Security Number
Your child will need a birth certificate for anything that requires proof of birthdate, legal name, and parents, like getting a passport, starting school, getting a replacement Social Security card, etc.
If the baby was born in the hospital, then usually someone with the hospital will stop by the room after the baby is born for you to fill out the paperwork for the birth certificate and Social Security number. If you have not chosen a name before you leave the hospital or otherwise do not wish for the hospital to send in your paperwork to the county and/or the Social Security Administration, you can do it yourself after leaving the hospital. Most states have a window in which the paperwork for the birth certificate must be filed (for example, in many states, you have 5 days after the baby’s birth to file).
You should receive the baby’s Social Security card/number in the mail, and in some states, they will also send you the official birth certificate. In most states, however, you must go to the courthouse or health department to get an official copy of the birth certificate.
2. Citizenship (for foreign adoptions)
If your child was adopted from a foreign country, they are eligible for United States citizenship. Even if the adoption was finalized in another country, you might consider going through the “re-adoption” process, depending on your state of residence. Re-adoption can allow your child to get a U.S. birth certificate and citizenship and protect against legal challenges to the validity of the foreign adoption.
Talk to a lawyer about the requirements in your state, and do not put off the citizenship process. There are some tragic stories about people who were adopted as children, but their citizenship was never processed, and they ended up without legal immigration status as adults.
3. Health insurance
If you and your spouse have different health insurance plans, compare the plans and see which one provides the best bang for the buck, and add your child to that plan.
You generally have just 30 days to add your child to your health insurance, so get on this ASAP! Your insurance company may not let you add your child until open enrollment or another qualifying event if you miss this window, and may even decline coverage from hospital bills for the baby (but not for you).
4. Disability insurance
Disability insurance (and AD&D) isn’t frequently talked about, but it may be worth considering, especially if you have an extra person to support. If disability insurance is available through your employer, they will often pay up to 60% of your normal paycheck for a certain period of time if you become disabled.
5. Maternity/Paternity Leave
If you are lucky enough to work for a company that offers generous parental leave policies, use them! If your company’s leave policy is less than generous, and you are planning to return to work, you may be able to cobble together a few weeks of time off by using parental leave plus vacation time, sick days, disability leave, or unpaid leave under FMLA (certain conditions apply).
If you recently gave birth, you’ll appreciate the extra time to recover, and both parents will benefit from trying to snag a few extra winks where you can.
If you adopted a child that is already sleeping through the night, parental leave gives you some quality time to bond with your child, especially if they are not yet in school.
Decide how you want to work out your child care plan, including a backup plan for when or if your normal arrangement doesn’t work out. That plan may include deciding if it makes sense for one spouse to stay at home full-time or part-time, and whether your child will go to a daycare or have in-home childcare or a nanny.
7. Naming a guardian
If you and your spouse do not already have wills, it just became a little more important. Whether or not you have kids, having a will simplifies managing your estate or end-of-life wishes should anything happen to you. But once you have children, it is extremely important (though like life insurance, hopefully unnecessary) to specify your wishes as to guardianship for your child and future children should something happen to both you and your spouse.
If you do not live close to family or to the person you have chosen as a guardian, you may also wish to specify a temporary guardian who your child can be with until the permanent guardian can reach them.
You and your spouse both need wills, if you do not already have them, to protect your estate from probate and to make it easier to protect and distribute estate assets as you wish. Once you have a will in place, update or revisit it at least once a decade or after any big life changes (birth, divorce, marriage, death, etc.).
You may also want to set up a revocable trust, which is a little more complicated but has some major benefits. A revocable trust allows you more control over what funds your minor child would get, and how they are administered. It also allows you to keep your estate private since you avoid the probate process.
9. Adjust beneficiaries
After taking care of your will or trust, make sure you update beneficiary designations on all of your insurance and retirement accounts to reflect what is in your will. If they do not match, your beneficiary designations on your accounts may override what is specified in your will or trust.
10. Tax adjustments and benefits
After your child is born, you may wish to talk to your employer to adjust the number of allowances taken out of your paycheck. A greater number of allowances means less money withheld and more going into your pocket.
Also be aware that having a child can give you a couple of great tax breaks—for adding a dependent child, and possibly in the form of a flexible spending account for dependent care.
If you can do it, making regular contributions to a UTMA account (Uniform Transfers to Minors Act) is a way of setting money aside for your child to use once they are grown. The money in a UTMA account is held in your name (or the name of another custodian) and becomes your child’s property once they reach majority age.
The UTMA account assets can invest in almost anything—stocks, bonds, mutual funds, etc., and can be used for any reason for the benefit of the recipient. One word of warning—the money in this account is considered an asset held by your child, and may affect their eligibility for financial aid in college. If that is a concern, you are better off using a 529 savings account.
12. 529 Account
A 529 savings account is a great way to save for your child’s higher education costs, but you may not be ready to make serious contributions yet. Still, having the account increases the chances that some contributions will be made by you or by other family members. 529S accounts allow you to avoid paying capital gains taxes on the money in the account, as long as it is used for higher education. Thirty-three states plus D.C. offer income tax deductions on contributions to the account, and tax-free withdrawals.
One caveat—many financial planners will tell you to make sure that you have your own savings in place before you put a lot of money into a 529. That college money will not help much if you are just squeaking by without an emergency savings fund or with meager retirement savings.
13. Life Insurance
Life insurance is something that both spouses should ideally have. Women should consider buying a policy before getting pregnant, or early in the pregnancy in case any potential complications arise. The spouse with the primary income should get insurance, especially if the partner is a homemaker and not working.
Most term life insurance (which is generally the most affordable for those starting a family) requires a medical exam and allows you to lock in a cheaper rate when you are young and healthy.
You may also opt to buy a whole life insurance policy, a jumping juvenile policy, or a child rider on your term life policy for your child.
And, remember, Tomorrow is not a law firm, this blog was not written by a lawyer, and we do not provide legal advice. When in doubt, talk to a licensed attorney in your area.