While estate planning is important for every parent, single parents face unique challenges when planning for their children’s future. As the primary caretaker for your children, you need to plan for several scenarios to ensure they have the proper safeguards in place. No matter how large or small your estate is, it’s important to protect it for your children.
An experienced attorney can walk you through the processes of how to protect your children’s family home or other assets you’ve built up from probate and other taxes, as well as from predators who can steal from your unsuspecting children. These five estate planning tips for single parents will make sure your children are properly protected in the event of your death or incapacitation.
1. Create a Will and/or trust.
No matter what your family situation, step one of proper estate planning and understanding the unique considerations that come with having a child, especially a minor, inherit from you. Avoiding probate is just one consideration. Knowing how to protect what your children inherit from your creditors and to stagger distributions to them to ensure they don’t squander their inheritance or become vulnerable to manipulation by others is another. A Wil is not the best answer in these situations. It may be far better to set up a trust – especially if you own any real estate.
By setting up a trust for your minor child(ren), the assets you leave behind, including your family home, can be maintained (if desired) or otherwise managed by a trustee. The assets of the trust can provide ongoing financial support for your minor child in a structured and safe manner.
Trusts can also protect children after they turn the legal age of 18. Even though they are now considered adults, they may not have the knowledge, skills, or maturity to properly manage their inheritance. Your trust can designate yearly funds or delay inheritance of the entire estate to a later date.
2. Designate a legal guardian.
As a single parent, it’s essential to designate a trusted, responsible adult to take physical custody of your minor child(ren) if you die before they reach adulthood. If you have sole custody and pass away without choosing a legal guardian, your child’s other parent (if still living) may automatically be given custody, which may not be in the best interest of the child if the marriage dissolved due to abusive issues, a criminal record or homelessness.
When you’re choosing a guardian, remember that it does not have to be the same person who’s managing the trust on behalf of your child(ren). Sometimes it’s wise to have different people managing money and children, as they have different skills and qualifications. One may be better at parenting, while the other is a whiz at financial investing. If two people are designated, they will need to work together in the best interests of the child.
Some items to consider when designating a guardian include:
- Whether your child should receive an allowance.
- Whether the guardian should move into your home to care for your children, and if so, what is their legal responsibility for care of the home?
- Whether the guardian will be compensated.
- Religious concerns.
- Whether the person you want to be the guardian will accept the responsibility. Always ask before designating anyone.
3. Plan for incapacitation.
Another scenario single parents must consider is what should happen if they become incapacitated. When planning for incapacitation, you may name an attorney-in-fact or agent under a durable general power of attorney to make financial and health care decisions if you are unable to do so. Designating such a person allows them to make financial decisions for you, including using your funds to support your children or maintain their family home during your incapacity.
4. Consider life insurance.
To help ensure their children have financial support after their death, a single parent should consider investing in additional life insurance or increasing the death benefits under an existing policy. However, you should not name a minor as a beneficiary to an insurance policy, as life insurance companies will not pay proceeds to minor children. Instead, it is best to create and name a trust as the beneficiary of your life insurance, and then your trustee can manage the assets on behalf of your child(ren). This also avoids a separate, lengthy and expensive court process to appoint a guardian to manage these assets for your child(ren).
5. Speak with an experienced estate planning attorney.
If you are a single parent ready to secure your child’s inheritance, speak with an experienced estate planning attorney about your options. Schedule a free, 30-minute consultation with the Law Office of Patricia E. Tichenor to discuss your Virginia estate planning needs, including Wills, trusts, and guardianship plans.