New arrivals during senior years are no longer limited to celebrity lifestyles, but they do require your resources and planning for guardianship issues.
The news that Rolling Stone Mick Jagger, now 72, is 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 Stone Ronnie Wood, 68, and his wife welcomed twins in May, and Billy Joel at age 66 became a dad last year 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, the 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. Then the estate can distribute assets to the adult children.
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.
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.
Reference: CNBC (July 21, 2016) “Jagger’s changing diapers at 72. How to manage that”