While estate planning is important for everyone, it is especially important for single parents. As a single parent, your child relies on you for everything. Although it can be tough to think about, it is vitally important that you plan for the worst.

Taking time to plan today could save a lot of hardship for your children down the line. Here, we will go over important considerations that all single parents should be aware of when making their estate plan. These considerations can ensure your children will be protected if you are no longer around.

What Should I Consider?

Single parents’ estate plans require extra caution because they are their child’s sole lifeline. They need to cover all bases to make sure their children are protected no matter what. In this article we will address several important considerations, including:

• Guardianship;
• Life Insurance;
• Wills and Trusts;
• Asset Distribution;
• Special Needs; and
• Incapacity

Each consideration plays a special role in your estate plan. Considering these points will allow you, along with help from an experienced estate planning attorney, to be prepared to create a comprehensive estate plan that fully protects your children.

Guardianship

Guardianship is a legal role given to an individual to manage the finances and activities of another person. Your nomination can be made in your will. If you do not name a guardian in your estate plan, the courts will appoint one for you and their choice may not be who you would have chosen.

A guardian will help to raise your children to adulthood, teaching them how to be successful, contributing members of society. As a single parent, you work tirelessly to raise your children and teach them right from wrong. That is not a job to be taken lightly. By naming a trusted person who is equipped to assume this role, you can rest assured knowing that your children will have a capable guardian to guide them into adulthood.

Life Insurance

As a single parent, life insurance is a vital element of your estate plan. Having an adequate life insurance policy will allow your children to have the money they need for their care. Children under 18 cannot inherit directly, but you can take one of two routes to make sure the money you leave is used for child care.

The first route is to name your child as the beneficiary of the policy and to name a custodian to be in charge of the funds. The custodian will be tasked with doling out the funds for appropriate child care expenses.

The second route would be to set up a trust and have your children receive the policy funds through the trust. You would name your trust as the beneficiary of your life insurance policy and then have your children stand to inherit through the trust. Here, the trustee who oversees the trust would be responsible for making sure the funds are used for the child’s care. The trust can also outline how and when your children could receive these funds. For example, you can outline that you want this money used for childcare-related expenses. You can also state a timeline that the asset distribution can follow. If you do not want your children to inherit this money until they graduate high school, or college, or get married, you can set up those parameters in a trust.

One more perk of a trust is that it can protect your heirs’ inheritances from creditors. If the trust is set up to do so, your heirs’ creditors cannot get their inheritance while the money is still in the trust. This can add an extra layer of protection, especially if your children are set to inherit this money with student loan debt, or may be prone to impulsive spending.

Life insurance is a good way to leave your children the money they will need to grow up. Choosing the right distribution path is key because if the children are minors, they will not be able to directly inherit. An experienced estate planning attorney can help you find a path that gets the funds to your children while having a responsible gatekeeper monitor the use of the funds.

Wills and Trusts

A will or trust is usually the focal point of one’s estate plan. While every document in an estate plan is important, wills and trusts are important in their own right.

A will is a document that states how you want your estate to be distributed after death. Wills have to pass through probate. Probate is a process where the court essentially verifies the will’s validity. The court will then give the executor the power to carry out the will’s instructions.

A living trust is a legal entity that holds your assets and provides instructions for how those assets will be distributed after death. With a revocable living trust, the grantor, or creator of the trust, can act as the trustee throughout their lifetime, maintaining complete control over their assets.

A big difference between wills and trusts is that trusts do not have to pass through probate. They are their own legal entity. The trustee can begin to distribute your assets quickly after death. Wills do go through probate. The assets from a will cannot be distributed until the whole probate process is completed and the executor has taken all of the necessary steps.

Wills are better for some situations while trusts are better for others. Having either of these in place will give your assets direction upon your passing. We recommend consulting with an estate planning attorney to help you decide which option is best for your specific needs.

Asset Distribution

A major reason why many people create a will or a trust is to control the distribution of their assets upon passing. Asset distribution is especially important for single parents because their children rely on them so heavily. As a single parent, inheritance laws would likely have a significant chunk of your estate go to your children if you die without a will. So then why do you need a will or a trust? You need one because either of those documents will allow you to control the oversight of your estate.

Child’s Ability to Inherit

Children under 18 are not allowed to take control of inherited assets, making it important that you name a guardian for your child’s inheritance in your will. By naming a guardian for the funds, a trusted person will monitor the inheritance until your child reaches adulthood.

Another reason why naming a custodian to monitor your child’s inheritance is that, in the event the other parent gains custody of your child, you may want a separate guardian whose job it is to make sure the funds are put to good use. If a single parent were to pass while the other parent is still alive, the child may well end up in the custody of the other parent. For some, this is not a desirable outcome. By creating a trust and naming a separate person to oversee the child’s funds in the trust, you can be certain that the funds allocated for the child are being spent properly.

A trust can be especially useful for asset oversight because the trustee will already be in place to oversee the assets. A trustee manages and holds the title to the trust’s assets. The trustee will be obligated to use the assets for the child’s benefit as they see fit. They can ultimately grant or deny requests to use the money for child care expenses. To that point, they have an obligation to grant reasonable requests while denying unreasonable ones. The trustee must be able to accurately judge these requests and make impartial decisions based on what is best for the child.

Special Needs

Those children with special needs may require government benefits, such as Medicaid, to obtain the treatment they need. In order to become and remain eligible for these benefits, the recipient must be below a certain income level. A large inheritance could put one’s eligibility at risk. A well-drafted estate plan should include clauses that state if any beneficiary is receiving government benefits, and those benefits would be lost from inheritance, then a special needs trust will be set up to hold the inheritance. The assets will then be distributed in a way that does not disqualify the beneficiary from receiving benefits.

Incapacity Documents

Incapacity documents are some of the most important estate planning documents because they are the ones that impact you during your lifetime. Incapacity documents include:

• Durable Power of Attorney for Finances;
• Power of Attorney for Health Care; and
• Living Will

A durable power of attorney for finances allows a named person to control your finances in the event you are in the hospital, out of the county, or otherwise unavailable. This person can pay bills, enter into contracts, or tend to your other financial needs. You can make this power as broad or narrow as you want.

A power of attorney for health care allows a named person to speak with doctors, review medical records, and make treatment decisions on your behalf in the event you are unable to do so yourself. Should you become unconscious or incapacitated, the person who you name as your power of attorney for health care would have the authority to make these decisions.

These documents are especially important for single parents because their children rely so heavily on them and their well-being. Executing these documents can help you and your children stay afloat in the event the worst happens.

The last incapacity document we will cover is a living will. A living will allows you to state medical treatment preferences so your preferences will be known in the event you become incapacitated. Some parents may want doctors to do whatever they can to save or extend their life so they can be with their kids. Other parents would rather withhold care so they do not drain their assets. It’s a personal preference. You can state these preferences ahead of time in a living will.

A living will is helpful for your family, too. By stating your preferences ahead of time, your family will not have to make these tough decisions themselves. Completing this document will give your family peace of mind knowing you made these preferences known for yourself.

Who Can Help Me Plan?

While estate planning is important for everyone, it is especially important for single parents. An effective estate plan can help to take care of both yourself and your children in the event something happens to you. Now that the states of New Jersey and New York allow remote signing ceremonies, the process has never been easier. If you would like to get started on your estate plan, contact Rosenblum Law’s experienced estate planning team. For a free, no obligation consultation, call 888-235-9021 to get your planning underway.