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Estate planning can offer any adult numerous benefits, but this is especially true for single parents.  For many single parents, you are your child’s only lifeline.  Although it can be troubling to think about, it is vitally important that single parents plan ahead to ensure that their children will be taken care of in the parent’s absence.

Taking the time to plan today could save you and your children much hardship down the road.  We will address the most important considerations for single parents who are interested in creating an estate plan.  These considerations, when addressed in a comprehensive estate plan, will ensure that your children are taken care of in the event you are no longer around.

What Should I Consider?

Single parents’ estate plans require extra caution because of how heavily their children rely on them.  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 significant role in your estate plan.  Considering these points will allow you, along with help from an experienced estate planning attorney, create a comprehensive estate plan that fully protects your children.

Guardianship

Guardianship is a legal role given to an individual, allowing them to have custody of and authority over people who are unable to adequately care for themselves.  In the context of this article, we are talking about guardianship of minor children.  A guardian will raise the child, have custody over the child, potentially manage finances for the child, and make decisions on behalf of the child.  

As a single parent, you can name a guardian in your will.  In the event of your prolonged absence or passing, the court will reference your will and give deference to the guardian you have chosen.  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.  

The guardian would help raise your child to adulthood, teaching them how to be successful, contributing members of society.  As a single parent, you work tirelessly to teach your children right from wrong.  This is not a job to be taken lightly.  By naming a trusted person who is equipped to take on this role, you can rest assured knowing that your child will have a capable guardian to guide them through adolescence.

Life Insurance

The first route you can take is to name your children as the beneficiaries of your life insurance policy.  Since they cannot inherit the money if they are under 18, you should name a custodian to be in charge of the funds.  The custodian would be in charge of doling out the funds for appropriate childcare expenses.  

For single parents, life insurance is a vital part of an 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 directly inherit, but there are two routes you can take so that the money you leave behind will be used for your children’s care.  

The second route would be to set up a trust and have your child receive the policy funds through the trust.  You can do this by setting up a life insurance policy and naming the trust as the beneficiary.  From there, the children can inherit via the trust.  If the children are under 18, the trustee would be responsible for monitoring the assets and making sure the money is being spent appropriately on child care.  

You can also set up parameters to outline when you want your children to inherit the rest of their inheritance.  For example, maybe you want your children to inherit the rest of their inheritance upon graduating from high school or college, or perhaps upon getting married.  For the time being, the trustee can make sure your children’s guardian will get the money needed to care for the children, and then ultimately you can let your children inherit when you want them to.

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

When people think of estate planning, they usually think of wills and trusts.  These are the documents that outline, among other things, how you want your assets to be distributed.  In a comprehensive estate plan, no one document is the most important, but wills and trusts are certainly important in their own right.

A will is a document that outlines how your estate should be distributed upon your passing.  Unlike trusts, wills have to pass through probate.  Probate is the process where the court verifies the wills validity and gives the executor the authority to carry out your wishes.

A living trust is a legal entity that holds your assets and provides instructions for how those assets will be distributed upon your passing.  With a revocable living trust, the grantor, or creator of the trust, can act as the trustee during their lifetime, helping to maintain complete control over their assets in the trust.

A major difference between wills and trusts is that trusts do not have to pass through probate.  This allows the trustee to begin distributing your assets more quickly and efficiently.  A will, on the other hand, does not allow the executor to distribute the assets until the probate process is complete and all the necessary steps have been taken.

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

Asset distribution is the directional guidance you give to your assets in your estate plan.  Asset distribution is the main reason why many people get estate plans, but this concept is especially important for single parents.  As a single parent, inheritance laws would likely direct a very large chunk, if not all of it, to your children if you die without a will.  So why do you need a will or a trust?  You need one because those documents will allow you to control the spending of those assets once you are gone.

Child’s Ability to Inherit

Minor children are not allowed to take control of their inheritance.  This makes it very important that you name a guardian for your children’s inheritances.  Naming a guardian for your children’s inheritances allows you to hand-pick a trusted individual who can monitor the spending of your children’s inheritances until the children reach adulthood.

Picking a guardian to monitor your children’s inheritances may be useful in situations where you would want a third party to monitor the spending of the funds in the event the other parent gains custody of the children.  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, that is not ideal.  Creating a trust and naming a separate person to oversee the children’s funds in the trust can allow you to be certain that the funds are being properly spent on necessary childcare.

A trust can be particularly useful for asset oversight because the trustee will already be in place.  A trustee manages and holds the title to the trust’s assets.  The trustee will be obligated to use the assets for the children’s benefit as they see fit.  While they can ultimately grant or deny requests for payments from the children’s inheritances, the trustee has a legal obligation to grant reasonable requests.  The trustee should be someone who can accurately and fairly judge these requests.  They must be able to make impartial decisions based on the children’s best interests.

Children with Special Needs

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 remain below a certain income level.  A large inheritance could put one’s eligibility at risk once they reach the age of majority.  A well-drafted estate plan should include language that states if a beneficiary is receiving government benefits and such benefits would be lost from the inheritance, then a special needs trust will be set up to hold the inheritance.  The assets will then be distributed in a way that will not interfere with the beneficiary’s benefit eligibility.

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 New York allows for 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.