Becoming A Parent

A newborn baby can blissfully turn your life upside-down. But with all that excitement and wonderment come responsibilities. Insurance, education funding, your estate, even your retirement all take on a new urgency. It’s important to give your child security and protection, not just with attention and love, but through a strong financial strategy, as well.

Health & Life Insurance

Now that you’re making a significant lifestyle change, it’s important to keep up with the healthcare and insurance needs that come with it.

Health Insurance Chances are, you’ll incur high medical expenses during the pregnancy and delivery, so it’s important to understand the maternity coverage on your health insurance. If you don’t have health insurance, you may want to get an individual health insurance policy. However, if you wait until you’re pregnant to do so, or if you change jobs while pregnant, there could be a pre-existing clause that may either force a waiting period or deny coverage altogether.

Fortunately, your baby’s coverage can begin under an existing policy from the time of birth. Check with your health insurance carrier for specifics. And be sure to expect additional premiums and out-of-pocket costs after adding your baby to any health plan.

Life Insurance If you don’t already have life insurance, this is the time to think about getting it. If something unexpected happens to you, your spouse or loved ones could still have your financial support for years to come, even through the college years.

If you already have life insurance, you should evaluate whether it is enough to meet your new responsibilities.

Disability Insurance With a child depending on your income, you may find disability insurance worthwhile. Should you become unable to work due to illness or an accident, it provides monetary benefits that can diminish the financial impact on you and your family.

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Estate Planning & Trusts

With a new baby, it’s important for both to parents ensure they have up-to-date wills. You’ll need to decide on and designate a legal guardian – a person you both choose to raise your child in the event of an unexpected tragedy.

You may also wish to set up a trust for your child, and name trustees separate from your chosen guardian. Through a trust, you can ensure that your estate is paid out to your child according to your wishes. Among other things, trusts can be used to:

• Minimize estate taxes
• Shield assets from potential creditors
• Preserve assets for minor children until they are of age
• Create a pool of investments that can be managed by professional money managers
• Shift part of your income tax burden to beneficiaries in lower tax brackets
• Living (revocable) Trusts: With a living trust, you maintain control, and can change the trust or even dissolve it for as long as you live. Unlike a will, a living trust is not part of the public record. The trust can also be used to help you protect and manage your assets if you become incapacitated. Despite these benefits, living trusts have some drawbacks. Assets in a living trust are not protected from creditors, and you are subject to income taxes on income earned by the trust. In addition, you cannot avoid estate taxes using a living trust.
• Irrevocable Trusts: Unlike a living trust, an irrevocable trust can't be changed or dissolved once it has been created. Still, an irrevocable trust is a valuable estate planning tool. You may have to pay gift taxes on the value of the property transferred into the trust. All of the property in the trust, plus all future appreciation on the property, is out of your taxable estate. Property transferred to your beneficiaries through an irrevocable trust will also avoid probate. As a bonus, property in an irrevocable trust may be protected from your creditors.
• Testamentary Trusts: Established by your will, these trusts don't come into existence until your will is probated. At that point, selected assets passing through your will can move into the trust. From that point on, these trusts work very much like other trusts. The terms of the trust document control how the assets within the trust are managed and distributed to your heirs. Since you have a say in how the trust terms are written, these types of trusts give you a certain amount of control over how the assets are used, even after your death.

Keep in mind, trusts can be expensive to set up and maintain, and there are some other disadvantages that may affect you, as well. Should you be interested in setting up a trust, consult the services of an experienced attorney.

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Saving For Education

With all the expenses that a new baby brings, it may seem as if you have plenty of time before you’ll need to think about paying for college. But there’s no better time to start saving than now. With the rising cost of education, by the time your baby is college-bound, the annual price of a good private college could almost triple.* If you start a fund early, and contribute regularly, you could be making a great investment in your child’s future.

There are many different vehicles available that allow you to invest as much as your budget permits, some of which have tax advantages. Use these links below to learn more, or visit our Education Planning page.

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	Naming beneficiaries of insurance policies and retirement plans

Taxes

Once you have a child, you may be entitled to some tax breaks. Following are tax credits you may qualify for:

• The Child Tax Credit: A $1000 credit for each qualifying child
• The Child and Dependent Care Credit: For qualifying child-care expenses
• The Earned Income Credit: For those with an annual income below a certain level.

If your annual income is below a certain level, you may be also eligible for an extra exemption, reducing your tax bill.

In order to claim any of these, you’ll need a social security number for your child. Often, you will be given the forms to apply at the hospital after your baby’s birth. If not, you can get the information through the Social Security Administration’s Web site.

The costs of raising a child can be challenging. With a few smart adjustments to your financial plan, you can confidently provide your child with a strong foundation for the future.

*The College Board, Trends in College Pricing, 2007

Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent advisor. AXA Equitable Life Insurance Company (NY, NY) does not issue health insurance and disability income insurance policies. Securities are offered through AXA Advisors, LLC.  AXA Advisors, LLC (member SIPC) and AXA Equitable are affiliated companies and do not provide legal or tax advice.