Why life insurance should be part of estate planning for new parents

From decorating a nursery to baby-proofing a home, becoming a new parent comes with a long checklist of to-dos. It’s a significant life change and it can impact everything in your life.

While it’s not the most fun to think about, one part of being a new parent that is commonly overlooked is end-of-life planning.

Whether you’re expecting or recently became a parent, here’s why you should put life insurance and estate planning at the top of your list.

Life insurance and estate planning should go hand in hand

Life insurance and estate planning work together to help protect your family’s future.

While we know it’s difficult to think about death during this special time in your life, you’ll enjoy peace of mind knowing that you’ve taken the steps to provide a safe financial future for your family.

Life insurance

It’s commonly overlooked, but life insurance is one of the best ways new parents can protect their family. Life insurance helps your loved ones in the event of your unexpected death, by providing a tax-free lump sum payment to your chosen beneficiaries (often a spouse or your children). This can help offset unexpected costs, loss of income, and cover any other expenses while your family adapts to their new life situation.

Some things that life insurance can cover include:

  • Mortgage payments
  • Funeral/burial expenses
  • Personal loans (e.g., for automobiles)
  • Future expenses (e.g., university tuition for children)

Wills and estate planning

Estate planning is the process of outlining a plan in advance for your assets (or your “estate”) after you pass away. This includes creating a will and power of attorney documents, and other end-of-life planning details.

Almost two-thirds of parents in Canada don’t have a will. As a new parent, having a will in place is one of the best ways to protect your family in the event that you pass away. There are many reasons parents need a will, including:

  • Choosing a guardian for minor children
  • Outlining specific gifts and wishes
  • Managing details around inheritances (including the amount your beneficiaries receive and the age at which they get the inheritance)

Without a will, many of these decisions will be made by the courts based on provincial legislation — and in many cases, these decisions may not reflect the choices you would have made yourself.

Part of estate planning also includes making power of attorney (POA) documents. Unlike a will, you may never need your power of attorney. But in the event of an unexpected emergency, your POA will make decisions about your property, finances, personal life, and medical care.

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