With every time crunch and other obstacle a single parent must face, estate planning may seem like a far-flung concern or something only needed by the wealthiest of parents. Nothing could be further from the truth. As a single parent with moderate income and assets, your child(ren) need to keep every penny possible that you worked so hard to earn! Here are seven top reasons – aside from taxes and special needs – that even a basic estate plan will save your family headache and heartache down the road.
[Note: This post was written while I was a practicing attorney running a solo law practice. Since April 2015, I have been working with attorney, executive and entrepreneur clients as a career coach and writer, and I am not currently available for legal engagements.]
1) You can name a physical guardian. In your will, you can designate who your minor child’s guardian will be in the event there is no longer a living, available and appropriate parent. If your former spouse passed away, your child’s other parent is no longer involved with the child or there is a history of abuse or other reason to designate a non-parent guardian, this is especially important. (And in cases of abandonment or abuse, you should leave additional information and evidence separate from your will, if possible, to support your election of a non-parent guardian over the living parent.) Without your designation of a guardian, a probate judge will make his or her best guess on who is the best person for the job, which may or may not accord with your wishes or the actual best interests of your child.
In the case where your former spouse would ordinarily be guardian of your child in the case of your death, it is still advantageous to appoint a guardian. For example, there could be situations where he or she is unwilling or unable to serve as a guardian (including if he/she predeceases you).
2) You can name a property guardian. In addition to naming someone as a physical guardian to care for minor children, you can also designate who will take care of your child’s financial affairs. This person may or may not be the same individual who serves as the physical guardian. For example, your son or daughter’s other parent may be his or her physical guardian after you pass away, but you may designate your sister or brother to be a property guardian for the assets you have left behind. Without designation of a property guardian, the child’s custodial parent would have control of your estate assets.
3) You can set up a trust or custodial account. You may choose, after considering the options, to set up a trust or custodial account to manage the assets on behalf of your child and designate ages and conditions for which your child will receive the principal in the trust or account. A typical age is 25, for example. You may also wish for the child to receive equal shares at different ages so that if he or she does not properly manage the first influx of cash, there is another opportunity. Without a trust or account, your child will have unfettered access to any estate assets at age 18, which is probably not the most opportune time to make the wisest financial decisions.
4) Your estate will not need to pay to bond the administrator. If you die without a will (or if you do not waive the requirement in your will), your estate’s administrator (or executor) will need to be bonded for each year that your estate is in probate. This surety bond could drain hundreds of dollars in probate costs from your estate.
5) You can plan for incapacity or other health emergencies. None of us likes to imagine that we won’t be available for our children whenever they need us, but every day things do happen. As part of your estate plan, you can determine who will take care of your medical and financial decisions if you cannot do so yourself due to incapacity or another disability. Significant funds can be depleted on delay and wasted efforts if you do not plan ahead for this possibility, however remote.
6) You or your attorney will review your beneficiary designations. Have you checked that your former spouse, for example, is no longer listed as the beneficiary of your 401(k)? If you have more than one child, are they listed as co-beneficiaries (assuming this is your intent)? Are you sure? In the course of reviewing your documentation, you may be surprised what you find (and want to change).
7) The very act of estate planning will get your financial paperwork in order. As a single parent, you (usually) do not have another partner who knows the financial details of your life. Where is the information to claim life insurance? Where are the stock certificates and 401(k) account statements? Where is the safety deposit box key? As you work through the questions posed by your estate planner, you will have an opportunity to consider what information you need to document and where to best keep it available yet confidential in case your estate executor needs to find it.
Single parents, if you have read this post to the end, pat yourself on the back! You probably already know that life can throw a few curve balls your way. By educating yourself about estate planning, you have taken an important step to assure your children’s future. I wish you all the best.
None of the information posted on this site constitutes legal advice or forms an attorney-client relationship. This is a public forum. Please do not post confidential or fact-specific information regarding your legal questions on this site.