The best thing is to agree on a name, or at least make a shortlist, before delivery -- you may be too exhausted to think clearly after the baby arrives, which is when hospital administrators usually start pushing you to commit to a name. The hospital has only five days to submit a newborn's name to the Department of Health. If a name hasn't been chosen by that time, the hospital will send in an application stating the child's last name only. The Department of Health then sends parents an incomplete birth certificate and a correction form. Parents usually have up to a year to fill in a child's first name, add a middle name, or even change a name altogether. If you do wait to name your baby, expect plenty of bureaucratic red tape in finalizing the birth certificate.
Waiting too long to name the baby will have a trickle-down effect as well. Until you have an official completed birth certificate, you can't open a bank account in the child's name, apply for a passport (even an infant needs one to travel outside the country) or apply for the baby's Social Security number, which is required in order for you to claim her as a dependent on your income taxes. Most hospitals now make the Social Security application easy: You simply check a box on the birth-certificate form -- yet another reason to name the baby before you leave the hospital.
Changing a Name
Fast-forward a year. Let's say the baby you named Joshua at birth has been called Jimmy since he was a week old. Do you have any recourse now that the one-year correction deadline has passed? The answer is yes. But because a name change requires altering a child's birth certificate, in most states you must prove to the court that it's in the child's interest to have a new name; a change of heart by the parents may not be enough. You can always use a nickname and even enroll your child in school under that name. Saddling a child with two names isn't the most practical arrangement, though, since such documents as passports and driver's licenses must be issued in the birth-certificate name. When the child reaches 18 or 21 (depending on the state) they can petition the court on their own behalf for a name change. Their request probably will be granted if they offer a compelling reason, as in: "I've been called Charlie my whole life."
Saving for Education
Pros: Earnings on the account are not taxed when the money is used for qualified higher education expenses. You can put away a maximum of $500 per year per child if your annual dual income is less than $150,000 ($95,000 for a single donor; the law does allow a family member or friend to set up the account). Ask your broker for details.
Cons: This might not be as much money as you would want or need to put aside for your child.
State-Sponsored Tuition Plan
Pros: You can contribute up to $10,000 per year; this is tax-deferred until the money is taken out, then taxes are calculated in the lower student bracket. If the child doesn't go to college, the money is transferable to another family member for his or her education.
Cons: A state-designated broker -- not you -- is in charge of investing. Each of the 37 participating states has a slightly different setup. You don't have to live in a state to apply to its program, so shop around. Check out www.collegesavings.com for more information.
Regular Savings or Investment Account
Pros: You make all your own investing decisions.
Cons: You might be tempted to use the money for something other than your child's education.
Custodial Account in Your Child's Name
Pros: Your money is protected from your creditors. There are tax advantages: Gains of less than $700 are tax-exempt; up to $1,400, they're taxed at the child's rate (above that amount, gains are taxed at the parents' rate).
Cons: You'll have to file income taxes for a child whose account makes more than $700. When the child turns 18 or 21, depending on the state, you lose control and they come into the money, no strings attached, no questions asked.
Pros: You can control the age at which a child comes into his money.
Cons: This is a complicated and expensive legal undertaking and really only makes sense for parents who are putting away $50,000 or more a year.
Preparation for your child's future isn't complete until you draw up a will that clearly states your resources and your wishes for their welfare in the event of your death. Once you and your lawyer establish your estate in detail, you must make key decisions about the people to whom you would entrust your child's care. The first is the executor, a short-term appointee who would gather your assets, pay any debts and taxes, and distribute money and personal effects from the will. The next person is the guardian. Who would best bring up your child? This is both a legal and an emotional issue, since you have to consider how your child would fit into another family -- and how well that family would deal with the responsibility. Don't just spring these roles on your potential executor and guardian; talk to them about your intentions. You should name one or two back-up guardians as well, in case your first choice is unwilling or unable to take on the role when and if the time comes.
In addition to the will, consider establishing a separate fund to support your child. The most common way to do this is with a life-insurance policy. The money from the insurance policy goes into a trust, the terms of which you and your financial adviser will have decided on and put in writing. You'll need to appoint a trustee -- a family member, close friend, or financial adviser -- who will be in charge of managing and distributing the funds for such things as your child's health care, school, and clothing costs. (If you don't name one, a court-appointed lawyer will likely be put in charge.) To avoid any conflicts of interest, it's best not to choose the same person or couple to be both guardian and trustee.
Such details might seem unfathomable now, but they could have a lasting impact on your child's future. The sooner you take care of all necessary legal matters, the sooner you can get down to the most important business at hand -- enjoying your new baby.