The news that Rolling Stone Mick Jagger, now 73, was awaiting the arrival of his eighth child may have led to any number of bad jokes, but he’s far from alone. Financial planners report that having a baby later in life is becoming less unusual than in the past. CNBC’s recent article, “Jagger’s changing diapers at 72. How to manage that,” notes that remarriages often result in new children.
Similarly, Jagger’s band mate Ronnie Wood, 69, and his wife welcomed twins in May of last year, and Billy Joel at age 66 became a dad in 2015 for the second time. Becoming a parent later in life brings its own set of unique issues. Preparation is critical if you're going to juggle both day care and retirement.
The first issue to consider is guardianship, especially how you’d like your child to be raised if you pass away or become incapacitated. In this situation, a child's older sibling may be a good choice as guardian.
Next, as far as assets, you should think about creating a trust with certain provisions concerning how and when the money will be disbursed to the child, which can be important for those with multiple children. Parents should protect the minor child first. To make a fair distribution of the assets and to keep the estate out of probate, consider a living trust, which can hold the assets to put the child through college.
While some trusts force distributions out to a child thereafter, it may be a better option to keep assets in the trust. By giving the child the right to “remove and replace” trustees at a certain age, you can give them practical control of trust assets without losing bankruptcy, creditor and divorce protections. You’ll need to speak with an experienced estate planning attorney to set such a trust up well.
In addition, titling your property correctly is another important part of estate planning. Incorrect titling can mean assets falling outside of the trust, entering probate or being distributed in a manner not in accordance with the parent’s wishes.
Insurance raises some important considerations. With a child later in life and no work-based medical coverage, most retiree healthcare plans don’t cover minor children—and neither will Medicare. You’ll need to buy private coverage for your child. If you’re able to buy life insurance in your 60s or 70s, get a 20-year term policy that will protect your child through the age of majority in the event you pass away. If you are already claiming Social Security, your minor child may be able to get a payment of up to 50% of your benefit. The child must be single and under age 18, under 19 if he or she is still in high school, or 18 and over but disabled by a condition that started prior to age 22.
Parents can’t directly deposit their child's Social Security benefits into a 529 college savings plan, but it's common for them to spend the benefits on the child and invest a similar amount of money from their personal funds into a 529 or other savings vehicle. If your household income is mainly drawn from tax-exempt retirement funds, your child is likely to be able to max out on financial aid for college.
If this isn’t your first marriage, there are other things to consider. If you haven’t already, you’ll want to work with an experienced estate planning attorney to ensure your estate plan takes care of your current spouse and any children. Not only will you likely need to update your estate planning documents, but you should also give all your assets the once-over to ensure they’re aligned with your updated estate plan. Otherwise, you might unintentionally disown someone or leave assets to an ex-spouse in a way you didn’t intend. You’ll need to ensure the name on any bank accounts is consistent with the plan, as well as the names on beneficiary designation forms for retirement assets or insurance policies.
If you’re trying to do some Medicaid planning with your elder law and estate planning attorney, there’s likely to be some extra complexities. Ensure that, as you adjust your estate and Medicaid planning, you’re working with an attorney with plenty of experience in both estate planning and elder law.
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Reference: CNBC (July 21, 2016) “Jagger’s changing diapers at 72. How to manage that”