ESTATE PLANNING FOR SINGLE PARENTS
Single parents have a lot on their plates. Many single parents I know spend the days running from work to children’s activities, trying to make sure that the kids are taken care of in every possible way.
Being married with kids is a lot of responsibility. But, when you’re raising kids by yourself that level of responsibility shoots through the roof. Single parents have to think about things such as what would happen if they suddenly died? Who would take care of raising the kids? Who would manage their finances?
Having a well thought out estate plan is important for any family. But, when you’re a single parent having a thorough plan is absolutely critical to make sure your wishes are carried out. So, here’s a “road map” for an estate plan that can help all the single parents out there.
A Living Trust – The Most Powerful Estate Planning Tool for the Single Parent
As an estate planning lawyer, I frequently use living trusts for single parents. In fact, I’m of the opinion that it’s the most powerful estate planning tool a single parent can have.
A living trust is a legal agreement that a person creates while they’re living and into which she transfer ownership of her property and assets. The maker of a living trust agreement then sets specific rules on how they want the assets in the trust managed and controlled.
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For the single parent, a living trust allows them to be in charge of all their assets while they are alive and capable of managing them. Then when they die or become incapacitated, the successor trustee they’ve named will continue to manage the assets and make distributions for the benefit of their children. This is particularly important because with a living trust, a parent can establish the age at which a child can have access to the property in the trust. For example, you may not want your 18 year old child to have access to his or her inheritance so you might set a rule that says the trustee won’t be required to make a distribution until they reach an age that you feel is mature enough to manage money.
Living trusts are also great because they allow you to avoid the whole Probate Court system. Probate is the Court that will legally process a deceased person’s estate. One of the beauties of the living trust is that when the maker of the trust dies, the new trustee seamlessly takes over the control of the trust without the Probate Court having to become involved.
Nomination of Guardian – The Next Most Important Estate Planning Tool
If a living trust is the most powerful tool in the estate planning tool box, then the nomination of a guardian of your minor children is right behind it. Naming someone to act as a guardian for your child until they turn 18 is a very personal and sometimes difficult decision to make. But, if you don’t make your wishes known, then it could be left to a Probate Court judge who knows nothing about your values and hopes for your child to make the decision. It’s important to put your choices in writing.
Now, nominating a guardian for a single parent can get a little tricky because if the child’s other parent is fit, then guardianship of your child will likely fall to him or her regardless of your nomination. It’s still important to make your nomination in your Will or in a stand-alone nomination document in case the other parent is not fit or they’re not able to act.
A Power of Attorney – Looking Out for Yourself is Just as Important
If you’re a single parent, you’re probably the only account holder on your bank accounts and it’s likely that the deed to your house is in your name only. What would happen if you became incapacitated and no one was able to access your accounts to pay your mortgage and bills and be able to take care of your kids? This is where a Durable Power of Attorney comes in.
A Durable Power of Attorney allows you to name a trusted person to step in and manage your financial and legal affairs when you become legally incapacitated. Without a Durable Power of Attorney, someone will have to go to the Probate Court to petition to become your conservator. As you can guess, a Probate Court petition is going to be expensive, time consuming and it’s a public proceeding. Be sure to look out for your financial well-being and prepare a Durable Power of Attorney. In the end, you’ll be protecting your kids’ well-being too.
A Health Care Proxy
Similar to the Durable Power of Attorney, a Health Care Proxy allows you to name a trusted person to make medical decisions for you when you’re not able to communicate those choices. Again, without reducing this decision to a legally binding document, someone else will have to petition the Probate Court to become your guardian to make decisions about your health care.
Beneficiary Designation Forms – Don’t Forget These
Many single parents have life insurance policies (either employer sponsored or privately purchased), 401(k) accounts, IRAs or annuities. It’s incredibly important that you don’t name your minor children as beneficiaries on these contracts. If you do name them and something happens to you before they turn 18, then a financial guardian will need to be appointed by the Probate Court. Even worse, as soon as your child turns 18, they will have absolute control over the money. Instead of naming your children as beneficiaries, a better alternative is to name the living trust that you create.
A Last Will and Testament
Although I am of the opinion that a living trust should be the “kingpin” of a single parent’s estate plan, it’s still important to have a Last Will and Testament drawn. A Will gives you a chance to name the person to be in charge of your estate and how you want your estate disbursed when you die. You can also nominate a guardian for your minor children in a properly drafted Will.
Being a single parent is hard even when you do have the support of an ex-spouse and extended family. But, be prepared and make this the year that you get that estate plan done.