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Tag: Parents

Five Key Financial Tips for New Parents: Embrace the Changes!

Written by support@seostats.com on . Posted in Budgeting & Money, Investing, Kids.

Becoming a parent for the first time is thrilling – an experience unlike any other. As many have likely told you, your life will change dramatically. You also probably know that your financial life will have to change as well. This is usually a hectic time, so here are five quick tips to keep in mind if you’re expecting a new arrival or have recently welcomed one into your home:

 

Examine your Spending Habits

You may need to examine your discretionary spending once you begin to feel the financial pressures of parenthood. You’ll face a lot of one-time purchases (crib, stroller, car seat) as well as ongoing expenses (diapers, food, healthcare, shelter). The U.S. Department of Agriculture estimated in 2015 – the last year it made such calculations – that a baby costs on average between $12,300 and $13,900 for the first year of its life. With inflation since then, that figure is likely over $17,000 now. But yeah – you’re going to need a budget, if you don’t have one already. Want to learn how? Watch our video on breaking down your spending into Past, Present and Future Expenses!

 

Take a Close Look at Daycare Options vs. Staying at Home

This is a tough one in 2021. Daycare options are more limited and costs are higher due to the pandemic. Previously, financial advisors noted that it could be costly in the long run for a spouse to be out of the workforce for years due to the effect on that spouse’s career trajectory. The argument for daycare is tougher if there’s none available! But with the shift to remote work, you may find new ways to stay on the job without leaving your child. Get creative. Can your spouse and you take turns handling the baby? Perhaps you could team up with other working parents and rotate daycare duties.

 

Get the Right Level of Life Insurance

This tip is even less fun to think about than a budget, but one you should consider sooner than later. Let’s be clear: Life insurance should only be used to ensure adequate funds are available if you or your spouse dies and their financial contribution vanishes with them. The insurance would serve as a plug for any outstanding liabilities and provide short-term income replacement. It is for this reason we believe term life insurance is generally a preferable option to whole life for younger couples. Lastly, don’t forget that the labor provided by a stay-at-home spouse has a cost, too, so don’t think it’s only important for the wage earner to have life insurance.

 

Review your Emergency Fund

Life throws us curveballs from time to time. That great job you have can vanish with market crash. A car wreck can leave you incapacitated for months. The rule of thumb is to have three months of expenditures saved in case you’re sidelined by such an event. But now that a baby is part of those expenditures, the emergency fund may have to be larger than before.

 

Start Saving for College

A 529 plan is a great way to set aside money for your child’s college education. It may seem that the day will never come, but those 18 years from birth to a student’s first year as an undergraduate will go by before you know it. So you’ll benefit from leveraging the advantages that time provides ASAP. Every dollar you set aside today will likely add up to a far greater sum than if you delay your savings for a few years or more. These accounts grow tax-free until needed to support tuition and other expenses. There are some complexities among the 529 plans offered by different states. For example, in New York, a 529 is tax-deductible up to $10,000 a year. California doesn’t offer any tax deduction.

These are just some of the steps you can take as parents to improve your finances. If you are looking for a more thorough and long term plan, please reach out and set up a call today!

 

Lake Road Advisors, a Fee-Only, independent financial planning firm with offices in Corning, NY, Ithaca, NY and Portland, OR works with clients virtually all across the country. Paul Sydlansky, the founder of Lake Road Advisors LLC, has worked in the financial services industry for 20+ years. Prior to founding Lake Road Advisors, Paul worked at Morgan Stanley in Manhattan for 13 years. While at Morgan Stanley, Paul was a senior-level manager within the Institutional Equities Department. In 2018 he was named to Investopedia’s Top 100 Financial Advisors list. Paul received a Bachelor’s degree in Economics from Marist College and holds an MBA from New York University Leonard N. Stern School of Business. Paul is a CERTIFIED FINANCIAL PLANNER™ and a member of the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network (XYPN).

The 5 Most Common Estate Planning Mistakes Parents Make

Written by support@seostats.com on . Posted in Estate Planning.

In an effort to continue to bring you valuable insights, this month’s guest post is from attorney Laura Cowan, an estate planning attorney with offices in Manhattan and Minneapolis.

Laura’s practice focuses on helping individuals and families make important decisions today to avoid unnecessary pain and conflict tomorrow. She understands how complicated the estate planning process can be and guides her clients to ensure that their loved ones are taken care of and their final wishes are carried out. Laura’s expertise includes family protection, wealth preservation, and values-based planning, as well as planning strategies for unmarried couples and divorced individuals. Whether you are married or single, with a traditional family or blended one, just starting out or looking back on a life well-lived, Laura will help you craft a plan that achieves your goals today and for years to come.

Virtually every parent would agree that their children are by far their most valuable asset. Yet few parents do what is necessary to ensure their children are taken care of by the people they want should the unthinkable happen.

Maybe it’s because they assume a family member would step in and take care of everything. Or maybe it just seems too burdensome or upsetting to think about it that you continue to put it off. Perhaps you envision it being so time-consuming to sit down and figure these things out amongst your busy life that you just avoid it.

We have all heard stories about nightmare situations that have occurred without estate planning. Children placed in the care of unfit guardians. Money becoming the priority instead of the best interest of the people at hand. Unending legal battles that drag on for years and years. The sad part is that all of this can be avoided with some basic planning documents.

Here are five mistakes I have seen when it comes to estate planning and how you can avoid them:

 

#1: Naming Your Minor Children as Beneficiaries

This is one of the most common mistakes parents make with their estate planning. When a minor inherits property – whether through a will, life insurance policy, or retirement plan – a Guardianship must be established through the Probate Court for management of that property. A minor can’t own property, so a Guardian must be appointed to manage the property for them.

So, what’s the problem with a Guardianship? Besides the fact that the judge could pick the last person you would want managing your kid’s money, the Guardianship ends when the child turns 18. At age 18, your child is legally an adult and can therefore own and manage property. The Guardianship will be terminated, and your child will get a check for all the remaining assets. This is true whether she is being given $5,000, $500,000, or $5,000,000. Ask yourself: would you feel comfortable giving an 18-year old $500,000 – with no strings attached?

 

#2: Not Naming Guardians in a Will

Most parents agree that their children are their most precious asset. Yet many parents with young children fail to create an estate plan or name guardians in a will in the event tragedy strikes. Why? Many are simply unaware of the consequences of not planning. Some assume their closest relatives will step in and accept responsibility should something happen. In reality, what would happen is that a judge will decide who raises your children. And the judge could end up picking the last person you would ever want. Equally bad, you could have two or more family members who want to raise your children, and because you didn’t make your wishes known, they would have to battle it out in court.

 

#3: Thinking a Will is Enough

If you are a parent of minor children, a will is necessary, as this is the document where you legally name guardians for your children. There are many things a will does not do, however. It does not prevent your children from getting their inheritance outright at 18. It does not put any protections on the money you leave behind. It does name anyone to manage your health and finances should you become incapacitated. It does nothing to minimize or eliminate estate tax. It won’t adequately protect a child with special needs. Most importantly, a will does not let you bypass Probate Court.

Probate Court is the process of distributing your assets when you are gone. It is expensive, time-consuming, and public. A common misconception is that having a will means you avoid Probate Court. Not so. A will guarantees Probate Court. The only way to avoid Probate is to create a Revocable Living Trust. Attend one of our Free Estate Planning Seminars or Webinars to learn more about how a Revocable Living Trust can save your family time, money, and hassle when you are gone.

 

#4: Not Adequately Protecting Your Kid’s Inheritance

Many parents don’t realize they have options in terms of how their children receive their inheritance. Do you want them to get a big check outright? Or do you want to put some protections in place? Leaving money outright is problematic as it leaves it at risk of being spent, gambled away, or lost to a lawsuit or ex-spouse. A better option is setting up an asset protection trust for your children. It will keep the money accessible for their health, education, maintenance, and support, but protect it from a lawsuit, creditors, or divorce. It’s a win-win for everyone.

 

#5: Putting Off Planning Indefinitely

We totally get it. It’s not fun to think about these things. It forces you to imagine the worst-case scenario. But the alternative of not doing anything is much worse. Passing away without an estate plan is putting your family and assets at risk.

 

At the Law Office of Laura Cowan, we specialize in creating estate plans that will ensure your family and assets are protected no matter what! If you are interested in learning more, you are cordially invited to a Free Estate Planning Seminar or Webinar. We give a comprehensive overview of your estate planning options, and review our firm’s process, packages, and fee structure in detail. We look forward to meeting you!