Heirs and Teddy Bears: Estate Planning 101 for New Parents

Starting a family is a sweet time in young adults’ lives. Picking out colours for the baby’s room, deciding on a name, and finally welcoming home the new arrival are moments to cherish. It’s somewhat less fun for parents to make financial commitments or think about their own mortality. Estate planning can, however, be considered an act of love. While not as enchanting to a baby as a plush toy, long-term financial security is a thoughtful, crucial gift from a parent to a child.

Will and trust

A will is used to ensure, after your death, that your assets are distributed according to your wishes. It names guardians for your children and appoints an executor to manage your affairs. John Sutherland, Barrister and Solicitor, recommends that new or expectant parents meet with a lawyer to create a will as soon as a child is in the picture — or ideally before the child is born.

“Having a will ensures that your loved ones are protected from the chaos, cost and guesswork that would ensue should you unexpectedly pass away,” Sutherland says. “A will gives you the ability to clearly dictate who will raise your children, how your assets will be managed, and at what age your children will inherit.” A will can also set up trusts to ensure the child receives the inheritance at an agreed upon age, and who will hold the money in trust for the benefit of the child.

RESP: The gift of education

Kids grow up fast, though it might be hard to imagine that squawking little bundle out of diapers and sashaying on stage in a graduation gown. Parents with room in their budget should consider a Registered Education Savings Plan (RESP), one of the most generous programs available to families.

“Even small contributions are boosted by government grants, which is essentially ‘free money’ for your child’s education,” says Caroline Shutt, Family Wealth Advisor at Bellwether Family Wealth. If cash flow is tight, Shutt says, “grandparents can contribute at birthdays or holidays.” Grandparents can also set up their own RESP with their grandkids as beneficiaries. A modest, regular contribution really adds up (see sidebar) while the child grows.

While not as enchanting to a baby as a plush toy, long-term financial security is a thoughtful, crucial gift from a parent to a child.

Life insurance, added reassurance

Once children enter the picture, life insurance becomes another important financial consideration for young families. It isn’t about expecting the worst, Shutt says. “It’s about protecting your family’s lifestyle if the unexpected happens. It helps ensure that expenses like housing, childcare, and education don’t become an added burden during an already difficult time.”

When shopping around for a policy, Shutt advises that new parents seek clarity. It’s important to know what is covered, what is not covered, how long the coverage lasts, whether premiums can change over time, and what information must be disclosed during the application.

“Working with a trusted advisor, asking questions, and reviewing details carefully up front can help avoid surprises later and give peace of mind that the coverage will truly be there when it’s needed most,” Shutt says.

By enlisting professional help, and with some budgeting and forethought, you can secure your child’s financial future. In return, you can confidently get on with the joys of parenting.

Bellwetherworks with families to simplify financial decisions by offering guidance in investments, tax and estate planning, and insurance, all tailored to your family’s goals.

Sutherland Marshall Professional Corporationis a boutique law firm in downtown Oakville, specializing in Wills & Estates, Real Estate Law, and Family Law.

A small RESP contribution adds up

Saving about $96 bi-weekly adds up to $2,500 per year. The government then adds $500 annually through the 20% Canada Education Savings Grant (CESG).

Over 14 years:

Parents (or grandparents) contribute $35,000
Government grants add $7,200 (the lifetime maximum)

That’s $42,000 toward your child’s education before any investment growth and built gradually, one pay cheque at a time. The Canada Education Savings Grant (CESG) is subject to annual and lifetime limits and eligibility requirements.