For older parents, the first consideration is to have an estate plan. One of the most important functions of an estate plan is to have a guardian designated in your will for your children–this is even more important for a parent who has children late in life. If you don’t name someone to act as guardian, the court will choose and since the court does not know your children (or your particular family situation) the way you do, the person it chooses may not be ideal.
In addition to naming a guardian, you may want to set up a trust for your children so your assets are set aside for them for when they are older. If a child is the product of a second marriage, a trust may be particularly important. A trust can give your spouse rights, but allow someone else – the trustee – the power to manage the property and protect it for the next generation. If you have older children, a trust could, for example, provide for a younger child’s college education and then divide the remaining amount among all the children.
Another consideration is retirement savings. Financial advisors generally recommend prioritizing saving for your own retirement over saving for college, because students have the ability to borrow money for college and it is tougher to borrow for retirement. One advantage of being an older parent is that you may be more financially stable, making it easier to save for both. In addition, if you are retired when your children go to college, they may qualify for more financial aid. Older parents should make sure they have a high level of life insurance, and they should extend term policies to last through the college years.
Social Security is another consideration. Children can receive benefits on a parent’s work record if the parent is receiving benefits too. To be eligible, the child must be under age 18, under age 19 but still in elementary school or high school, or over age 18 but have become mentally or physically disabled prior to age 22. Children generally receive an amount equal to half of a parent’s primary insurance amount, up to a “family maximum” benefit. You will need to calculate whether the child’s benefit makes it worth it to collect benefits early rather than waiting to collect at your full retirement age, or at age 70.
To make a plan for late-in-life parenthood, call us at (413) 663-3200. Donovan O'Connor & Dodig, LLP has offices in North Adams and Pittsfield, Massachusetts and Bennington, Vermont to assist you with your estate planning needs.