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Jackie Davis:

A new child in the family brings many rewards and expenses. A lot of expenses. Crafting a plan that considers the immediate and long-term financial needs of your child can help ensure their future well-being and provide valuable peace of mind for you. In this video, we'll look at six important steps to consider before and after the birth or adoption of your child.

Step one, consider how your financial life will change. Will your income be affected? What about expenses? Do you have the right car or home for a growing family?

Do you need to move to a neighborhood with better schools? Will you need child care? If so, you'll need to consider those costs as well. Maybe you'll decide to make some adjustments to your day-to-day financial life.

It could be a good time to talk with your advisors about your investment portfolio to determine if your asset allocation or distribution plan still makes sense. Step two, review your insurance needs. Life, disability, and health insurance are all different types of insurance you need to review and consider when you're growing your family. Life insurance and disability insurance can provide your family with financial support in the event of incapacity or death.

When it comes to health insurance, you may want to review your options. Would a low deductible plan make more sense than a high deductible plan? And while we're talking about health care, you should probably start searching for a pediatrician. Ideally, one in your network.

Step three, tackle applications and paperwork head on. Growing your family is an exciting time, but you cannot forget about the key paperwork, like filling out your child's birth certificate and applying for your child's Social Security number. If you are adopting, you may need to fill out specialized paperwork. Also, remember to add your child to your health insurance plan.

Most plans require that you add your child within 30 or 60 days after the birth or adoption or you could forfeit coverage. And if you plan to travel internationally any time soon, apply for a passport for your child. They can take up to eight weeks to process, although usually you can pay for expedited processing.

Step four, create or update your estate plan. That means creating or revising a will and other documents that spell out how your assets should be distributed — to a surviving spouse, children, including your new child, and others. And don't forget to update the beneficiaries on any retirement plans, payable-on-death accounts, and life insurance policies. It is also important to have a designation of health care proxy, a living will, and a power of attorney for financial decisions if you become incapacitated. You should also choose a guardian to care for your child if you or your spouse die unexpectedly.

If you don't, the courts will decide for you. Finally, consider setting up a trust for your child's benefit. Trusts can protect assets for your child today and down the road from probate, from creditors, in the event of divorce, and more. Trusts can be a great vehicle to use when saving for your child, which brings us to our next step.

Step five, start saving for college. It may seem early, but college is expensive and the years will fly by. So consider establishing a 529 education savings plan. It grows tax free.

And withdrawals are also tax free if they're used for education costs. You may also want to establish a custodial account or a carefully drafted trust, which allow parents and grandparents to take advantage of gift and generation-skipping transfer tax exemptions. Funds from custodial accounts and trusts can be used for almost any purpose, so they're more flexible than a 529 plan.

Step six, if you haven't done it already, make sure your advisors, including your financial advisor, lawyers, and accountants, know about your new family member. There are many planning tasks associated with having or adopting a child, and some of them can be pretty involved. We've mentioned a few of them briefly here.

The guidance of knowledgeable advisors can be invaluable. So let's review the six steps. One, consider how your financial life will change. Two, review your insurance needs.

Three, tackle obligations and paperwork head on. Four, create or update your estate plan. Five, start saving for college. And six, let your trusted advisors know about your growing family.

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