A Suze Orman exclusive

I know, I know - you hate thinking about all this. You most likely are thinking "Suze, I am about to have a baby (or already have a very young child) and you want to talk about death? Please!" Well, while I admit I may not be the best person to bring to a baby shower, these are duties you have to face as a parent.

You need a will. Plain and simple. And I think even that is not enough; I think you should also have a revocable living trust. But let's just start for now with a will. The will is pretty basic: it lays out where your assets are to go if you die. The problem with a will is that it cannot control how these assets are invested after you die. If you and your spouse were both to die in the same accident, your three-year-old munchkin is now the beneficiary of everything governed by your will - only, nothing is set up to control how that money is to be invested on their behalf. Another problem with wills is that significant assets that do not have a designated beneficiary attached to them may have to go through a court procedure known as probate. Depending on the state you live in, that can be a time-consuming and sometimes costly process. And when there is a young child involved, your will may also have to go through a procedure known as probate guardianship, where, upon your death, a judge has the ability to decide whether the person you named as the child's guardian is indeed qualified. My final gripe with wills is that they don't help at all if you do not die, but become severely incapacitated. I know you don't want to contemplate that possibility either, but again let's focus on what your goal is: to make sure your child is financially secure no matter what tragedy may befall you. So let's say you are a single parent. If you become incapacitated, who will pay your bills, look after your money, arrange for your well-being? A will does not help you at all in this situation.

Now I know some of you may have heard that having a power of attorney document in place will ensure your financial affairs are taken care of if you become incapacitated. Not so fast, my friends. You must have a durable power of attorney if you want someone to handle your affairs in the event you become incapacitated. A regular POA is useless the moment you become incapacitated.

A Revocable Trust Could Be a Must
Okay, since I don't think a will and simple POA provide enough protection, what do I suggest you do to protect your little bundle of joy? A revocable trust with an incapacity clause. This document spells out how you want your financial life managed if you become incapable of making the moves yourself. When you die, the trust will be the template for how you want your finances handled. If you happen to die when your child is a minor, this will take care of their well-being and allow your family to avoid going through probate guardianship.

These are documents that you need today to protect your tomorrows. Any intelligent person will tell you that. If you choose to use a lawyer, make sure the lawyer specializes in trusts. They should quote you a flat fee and it should be around $1,500 - $3,500. The more assets you have, the more expensive the trust is. For that money the lawyer should not only draw the trust up, they should fund the trust, which means transferring the title of all your assets from your name to the name of the trust, as well as create a back-up will that will govern all the items that do not have a title to them or are not put in the trust. And the estate lawyer should spend the time necessary to explain every word of that trust to you.

Another option is to consider using a computer program to draw up the documents yourself. And I have to tell you that I have a CD-ROM I created that allows you to create your own personalized documents based on the law in your state. I believe in this product so much it would be wrong for me not to mention it here.

Unleash the Power
Along with that living revocable trust, you also want to have a Durable Powers of Attorney for Health Care. A hospital can usually provide you a DPOA for health care, at no cost. Now that you are part of a family, you have an obligation to make sure your family can continue to function if you become severely ill.

With this document, you appoint an agent (typically your spouse or another family member) to act on your behalf if you aren't able to make decisions for yourself. The DPOA for Health Care outlines your wishes regarding how doctors should proceed if you are severely ill and need life-support.

Talk Ain't Cheap
You and your spouse or life partner need to talk through your goals and aspirations for your children - before they are born. What is going to be the family policy on gifts, and allowances, and family vacations? Will you send your kids to public or private school? How much do you anticipate contributing to their college costs? I don't mean you have to commit to the exact program right now, but you better make sure you have a shared vision of how you want to handle the financial aspects of raising your children.

Be a Strong Financial Role Model
Bringing up baby includes imparting strong financial management skills. In my opinion, it is one of the most overlooked aspects of parenting. We teach kids the moral "rights" and "wrongs" but then we go ahead and run up a $10,000 credit card balance, or leverage our home equity to pay for an indulgent sports car. Folks, listen up: how you behave financially will be the determining factor in whether your kid grows up financially savvy or financially screwed-up. It's your choice. And your responsibility.

Okay now that I have scared the life out of you, I hope you take care of all of these essential documents. Trust me, you will feel unbelievably relieved when you have them in place. Then you can get on with the business - and the pleasures - of living, knowing you have everything in place to take care of your family. That's the way to live if you ask me.