A couple of years into my daughter's life, I woke one night with a jolt. Had we named a guardian for her in case we both died? I couldn't remember, so I scrawled myself a middle-of-the-night note. When I checked in the morning, sure enough, although I'm a consumer reporter and my husband is a financial planner, we had overlooked this crucial document. We're still kicking, and we've now added a guardianship document to our will, but the original blunder got me thinking: If two pros like us can screw this up, maybe other people also need help. That's why I dug deep to develop this list of 14 documents you need for your new baby.
Birth certificate: Duh! This one's a no-brainer, but there are a couple of details worth mentioning. Whether you give birth at a hospital or at home, the staff or midwife should give you the forms to apply for a birth certificate. Do this promptly. Waiting more than a year can complicate the process of getting other official documents, including a passport. Once you apply, not all states automatically send you a copy of your baby's birth certificate. You may need to fill out a separate birth-certificate order form. The Centers for Disease Control and Prevention provides a list of vital-records offices in each state. Since this is such a crucial and lifelong document, it may be worthwhile to order multiple certified copies.
Social Security card: Back in the day, people did not get Social Security cards until they got jobs, but times have changed. The Social Security Administration recommends applying immediately at the hospital. Your baby needs a Social Security number to get health insurance, have a bank account or be eligible for government services. And you need your baby to have one so you can claim him or her as a dependent on your taxes. If you did not apply at the hospital, you can visit a Social Security office.
Will: You need a will so that, in the event of your untimely death, you will have decided what to is to be done with your assets — whether bank accounts or baseball cards — rather than leaving the decision to a probate court. When the court decides, this process eats up time and money. Instead, you want to provide legal clarity so that the focus is on using those assets to take good care of your child. You should also appoint an executor who will carry out the wishes outlined in your will. Most of those who are married leave all of their assets to their spouses, with their children as alternative beneficiaries, but this advice comes with a caveat. "Only if it's an intact family," said estate planning attorney Lori K. Murphy of Lynch Conger McLane in Bend, Ore. "If it's a blended family, professional advice is definitely needed, since giving all assets to your spouse would effectively eliminate any inheritance to your children from a former relationship." In other words, if you have children from a first marriage, and you've remarried, you should consult an attorney to figure out how to provide for those children in the event of your death.
Guardianship document: This can be part of your will or an addendum to your will. It specifies who is to raise your child or children in the event that both parents die. The website BabyCenter.com provides a thoughtful list of questions to consider when choosing a guardian. It can also be smart to appoint an alternative guardian and temporary guardian. "I recommend that clients appoint temporary guardians in two situations," said Murphy. "When parents travel, it's important to delegate authority to a caregiver so he or she can seek medical care for your child. . . . In a death situation, if the permanent guardians live far away, consider appointing a temporary guardian to take care of your child until the permanent guardians arrive."
Letter of instruction: Here is your chance to philosophize about how you would like your children raised and educated if you die. Perhaps you are religious and would like your son or daughter to attend services. Maybe there are certain friends or relatives you would like to make sure they get to visit. Parents have also used this document to spell out nitty-gritty details. "I once had a client use a letter of instruction to provide a specific guide on how to handle a special-needs child," Murphy said. Things like "be sure to provide water in a red cup. Otherwise he will have a meltdown." And "be sure to buy fire engines as toys as they make him happy."
Trust: Trusts (also called "trust funds") are optional, but I include them on the list because they are often intertwined with wills, and they aren't just for rich people anymore. True, if you do have a high net worth, a trust can help you pass down money to your heirs with less taxation. But trusts have another purpose, and that is to pass your money along to your children at an age you consider appropriate. While your offspring are still young, a trustee manages the money for their benefit. "Trusts allow a trustee to expend funds a lot like a parent would do if he or she were alive," Murphy said. Your children receive the rest of the money at the age you have specified.
Beneficiary change form: Giving birth to a baby could prompt changes to your IRA, 401(k) and life insurance account beneficiaries. If you're married, by law, your spouse is the primary beneficiary on retirement accounts, unless he or she signs a waiver. The change is that you could designate your child as the backup or "contingent" beneficiary. This means your child receives the money if your spouse dies. Be aware that beneficiaries listed on these forms override what is written in your will.
Life insurance policy: If you bring a new life into the world, you should have life insurance. Life insurance is meant to replace income lost if a parent dies, so that the child will be financially cared for. Life insurance can be particularly essential if one parent is staying home to care for the child and not making an income.
Health insurance card: Speaking of insurance, don't forget to add your baby to your health-care plan and get each child a health insurance card. Even if you belong to a plan with a set enrollment period, you're allowed to make changes when you experience a qualifying life event such as the birth of a baby.
Immunization records: Your pediatrician will start a record of the shots your baby has had, but it's a good idea to keep an ongoing copy. You'll need it to enroll in day care now or school later. It's also helpful to know what diseases your child is immunized against if you'll be traveling abroad to less-developed countries.
529 account: It's never too early to start saving for college. In fact, you can open a 529 college savings account before your baby is even born! You simply open it in your own name and then transfer it later. These savings plans are individual investment accounts that grow tax-free as long as you use the money to pay college costs. You can start one in any state, some with as little as a penny. Starting a 529 early takes advantage of the power of compound interest.
Form 1040/1040A/1040NR: To claim some of the tax credits for which parents are eligible, you need to fill out one of these slightly more involved income tax forms. The 1040EZ will no longer do. Parents who meet the income limits can use the Child Tax Credit to deduct $1,000 from their taxes and the Earned Income Tax Credit to deduct roughly $3,000 to $6,000. You may also be able to earn a Child Care Credit.
Flex plan: Also called Childcare Reimbursement Accounts, these are more generous than the Child Care Credit mentioned above. Flex Plans are offered through many employers and allow couples to set aside up to $5,000 for child-care costs. This money is not subject to income or Social Security tax. Calculators show a couple in the 25 percent tax bracket would save up to $1,250 a year using a flex plan to pay child-care costs.
W4: Because the above child tax credits may lower the amount of income tax you owe, new parents may want to adjust the amount of tax Uncle Sam withholds from their paychecks each pay period. This is the form to adjust your withholding.
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