Any posts by JCBourne are for entertainment purposes only. Know your laws and seek help from a trained professional. JCBourne is not a doctor and shouldn't be taken seriously; he is a fictitious character.
From a parent of two... Your fucking nuts, they are going to easily break the man on man coverage. And drop you two with no mercy.
just kidding... Actually not kidding; but congrats anyway. I have a girl and a boy and I know your not supposed to have favorites, but I do(i hide it well) She melts me... I have never thought about a female as much as I think about her.
Once you hold your new baby in your arms for the first time, the last thing on your mind is all of the money-related tasks and decisions you have to make.
Handling this while you?re bleary-eyed is guaranteed to lead to less-than-optimal choices. As a new mother myself, I did my best to prepare ahead of time. But nearly seven months later, even this personal finance reporter hasn?t managed to fully organize her financial and legal affairs.
What I have done is create a series of to-do lists, one for before and after the baby arrived, which has certainly helped my family maintain some sense of order. So sometime after you start considering baby names, but well before you start to assemble a crib and decorate a nursery, try to check off as many of these as possible. (And if there?s anything you?d like to add to the list, please let us know on the Bucks personal finance blog.)
Before the Baby
AUTOMATE SAVINGS Once you?ve figured out your company?s parental leave policy, start thinking about how much time you want to take off and how you?ll pay for it. A substantial chunk of my maternity leave was unpaid so while I was pregnant, I started automatically shuttling money into subaccounts that I called ?baby leave? and ?day care.? (Capital One 360, formerly ING Direct, allows you to set this up in a snap.) Even though I was only redirecting money from one account to another, this gave me some sense of control over the big expenses lurking around the corner. I also wanted to get a few months ahead of the game with day care so that I would have money set aside when that big expense kicked in.
BUY LIFE INSURANCE Term insurance, which pays a specific sum if you die within a certain term, like the next 20 years, is usually the cheapest and most efficient avenue. Several financial planners suggested that women apply for coverage even before becoming pregnant, or at least early in pregnancy, to avoid potential issues later. ?Pregnancies can sometimes be complicated by things like gestational diabetes, et cetera,? said Byron Udell, president of AccuQuote, an online insurance brokerage. ?The insurance companies sometimes, but not always, postpone decisions to cover them during their third trimester, especially if there are any issues.?
How much insurance you need is a personal calculation, but even a stay-at-home parent should have some. Parents also need to ask themselves a variety of questions, including how much income they will need to replace. Buy the insurance outside of your employer so you can take it with you wherever you may go, the experts said.
DISABILITY INSURANCE This insurance, which pays a portion of your salary for a period of time if you become disabled, doesn?t tend to rank high on the priority list, but financial planners suggest considering it. Group policies offered through your employer typically pay about 60 percent of your current paycheck, some advisers said. ?First look at what is available through your employer,? said Clarissa R. Hobson, a financial planner in Colorado Springs, Colo., who acknowledged that the coverage wasn?t cheap. ?Some coverage is better than none.?
CHOOSE A HEALTH PLAN Ideally, you want to think about this before you?re expecting so you can choose the plan with the best maternity coverage. And be sure to inquire whether there are any out-of-pocket costs to avoid surprises later. You generally have about 30 days to add the baby to the plan after the birth ? precisely the time you?ll be the most sleep-deprived. So think about how to best optimize family coverage ahead of time. How much more will it cost to cover a new child? Is it more cost-effective to put the baby on the mother?s or father?s plan?
SUSPEND FLEXIBLE SPENDING New mothers going on leave may need to turn off contributions to flexible spending accounts if there is no longer a paycheck to deduct from. The same goes for commuter cards. Speak with your human resources department about spending deadlines, particularly on flexible spending. My human resources department told me that claims must be made while the account is active. Once you?re back at work, you can flip the active switch back on, even outside the open enrollment period, because it?s considered a status change. After the Birth
EMERGENCY SAVINGS, THEN 529S You should have an emergency cash cushion in place (about six months of living expenses) before even thinking about a 529 college savings plan, several planners said. Still, you really can?t open one of these state-sponsored accounts soon enough. Its mere existence means you?ll be more likely to deposit found money like cash baby gifts or income tax refunds.
Here?s a quick 529 primer: as long as you use the money for higher education, you don?t have to pay tax on capital gains. Thirty-three states plus the District of Columbia offer income tax deductions on the 529 plan (as long as your plan is sponsored by the state or territory where you file a tax return), and withdrawals are tax-free. It?s best to open the account with the parent as the account owner and the child as a beneficiary, as soon as you get your baby?s Social Security number.
TAX DECISIONS Even babies born on the last day of the year provide their parents with a nice tax bonus: in 2013, a child will reduce your taxable income by $3,900.
But while that exemption is available to all taxpayers, you may need to choose one of two tax breaks if you plan on working and paying for child care. If your employer offers a flexible spending account for dependent care, you can set aside up to $5,000 to pay for day care or a nanny; it?s excluded from your income. The child care credit is a credit (meaning if you owe taxes, you will be credited dollar for dollar) for up to 35 percent of child care expenses up to $3,000 for one child, or $6,000 for two children. (The percentage drops to 20 percent from 35 percent as adjusted gross income rises to $43,000 from $15,000). ?If you have both available, the flexible spending account tends to be better, especially for higher incomes,? said Mark Luscombe, principal analyst at CCH, a tax and accounting information service.
In fact, to avoid withholding too much income from your paycheck for taxes, you and your spouse should think about revising your W-4 form with your employer.
THINK ABOUT GUARDIANS Picking a guardian to care for your child should something happen to you or your partner is the last thing you want to think about when welcoming a new baby, and that?s why many parents procrastinate in writing a will. ?I have had clients come to me to have a will prepared after their child turns 18 because they could not decide on a guardian,? said Nancy Bender-Kelner, an estate planning lawyer in Minnetonka, Minn., and a mother of four.
One option is to create a temporary arrangement. ?You might choose your parents now and then change it as your parents age,? said Ms. Hobson, the Colorado financial planner, who is also a new mother.
And remember that there?s no rule that says the guardian must be the same person who oversees the child?s financial affairs. In fact, some parents prefer to name a couple of people with different strengths, which can serve as a system of checks and balances ? the loving uncle may serve as guardian, while the finance-savvy aunt handles the money. Once you decide, be sure to speak with these people about their role.
THE ESTATE PLAN Depending on whom you ask, you need to create either a will or a revocable trust to serve as the main document to execute both your and your spouse?s wishes in the event of your untimely deaths. Some experts suggest the path of least resistance. Just write a basic will, which should contain what?s known as a testamentary trust, or a trust created for the benefit of the child and that usually goes into effect only if both parents die, said Ms. Bender-Kelner. (But if you have family assets you want to pass directly to the child, instead of a partner or spouse, the trust could be used in that situation, too). Having some sort of trust in place is important; if you don?t, and a minor child is named a contingent beneficiary on a retirement account, for instance, the financial institution will not pay the funds directly to the child, but instead will ask the courts to establish a conservatorship to oversee the child?s finances. (It also means the child would be able to receive all inherited money at age 18, which may not be desired.) That can be a long, burdensome process and is best avoided, experts said.
Creating a will is certainly the simpler and less expensive route. But some lawyers still call a revocable trust the gold standard. One of its main advantages is avoiding probate, or the court-supervised process to settle a deceased person?s estate. But it also streamlines everything: all of your assets are put into the trust during your life. They remain in your control and can be changed at any time. After you die, a trustee that you name distributes the assets according to your instructions, all while avoiding probate.
?You shouldn?t let the perfect be the enemy of the good,? said Robert B. Fleming, an estate planning and elder law lawyer in Tucson. ?Better to create a will with a testamentary trust than not to have done anything.?
BENEFICIARIES Once you?ve drafted your estate plan, you need to make sure that all of your beneficiary designations ? on your retirement, life insurance and other accounts ? coordinate with what is laid out in the will.
REMEMBER DATE NIGHT When the baby arrives, changing just about everything, it can be difficult to remember what it was like when it was just the two of you. So do what you can to stay connected and keep your partnership strong, particularly at what is the happiest and most stressful time of your lives. ?Make at least a monthly date night a nonnegotiable part of your spending plan,? said Kristin Harad, a financial planner in San Francisco whose firm, VitaVie Financial, focuses on new parents.