Single parents find themselves in a precarious position. If something happened to you, the future health, well-being, and financial stability of your child would be uncertain. That’s why taking the necessary steps to create an estate plan ranks among the most responsible thing you can do today.
When you begin to imagine what your child’s future might look like without you, it’s easy to understand that estate planning ranks as a single-parent necessity. An experienced estate planning law firm can work diligently with you to craft legally-binding documents that ensure your child will enjoy the security they deserve. These are three things to consider.
1: Select the Right People to Care for Your Child
If you are raising a child in the absence of another parent, designating a guardian is a critical step. In the absence of a nominated caregiver, the court will appoint someone the judge believes is suitable. It’s not uncommon for your values and those of a court-appointed guardian to differ. Start by making a list of the items that matter to you. These may include the following.
- Moral Values: These may include kindness, religious affiliation, spirituality, integrity, honesty, and confidence around things such as alcohol and substances.
- Financial Values: Ask yourself, does this person have the business acumen to manage any resources you leave to raise the child? Do they act responsibly with money?
- Education: What value do you expect to be placed on education, in terms of academic success, college, or technical school study after high school?
Without a court-enforceable directive, the judge will appoint someone who petitions to act as a guardian or a stranger. Once you have someone in place who makes you feel comfortable your child will be well cared for, it’s time to pick someone to manage the finances.
In most cases, it makes sense to separate financial and caregiving responsibilities by designating a trustee. This person will be empowered to dole out resources to support your child. It’s crucial they are frugal and can work seamlessly with the guardian. Single parents will also be tasked with creating detailed documents about how resources are to be used and when.
2: Include Life Insurance Directives
Not every parent enjoys wealth, and single parents often struggle to provide the quality of life their children deserve. One of the key strategies to an estate plan that delivers financial security is deftly handling life insurance payouts.
It’s not uncommon for single parents to utilize the 20X rule, which is carrying coverage equivalent to 20 years of your current annual salary. But how this benefit is doled matters just as much as the total payout. For instance, it would probably not be the child’s best strategy to deposit the lump-sum payout into a bank account and provide unfettered access to the guardian. Even well-meaning people may not have the financial acumen to effectively leverage money successfully over many years.
Better strategies may include having a trustee make specified monetary releases monthly or annually. In this way, the asset can deliver long-lasting financial support. If the policy’s coverage is high enough, a portion may be set aside for your child to access in adulthood. This money could also be designated for college tuition and expenses, or a major purchase, such as a first home. The point single parents may want to consider with regard to life insurance is that it can be a vital part of an overall estate plan, rather than a single payout asset.
3: Create A Living Trust
According to a survey conducted by AARP, upwards of 60 percent of all Americans do not have a living will or estate plan. Needless to say, single parents are among these 6 out of every 10 people.
Not having legally-binding documents that define what happens, leaves these decisions to the discretion of the court. If you want control over your child’s future should you die prematurely, a living trust makes a world of difference.
By establishing a living trust for your minor child, your assets will be transferred to your trustee to oversee. Your designee will promptly be able to use the resources for the support and care of your children, rather than being tied up in a lengthy probate proceeding. Living trusts also allow you to define how you want assets used, such as for your child’s education, medical treatment, travel, living expenses, clothing, etc. The bottom line is that a deftly crafted living trust gives you long-term decision-making power to continue caring for your child.
Don’t Wait. Contact an Estate Planning Attorney Who Knows Single Parent Needs
There may be no greater act of love than taking proactive steps now to ensure your child will enjoy a stable and financially secure life. No one can predict when tragedy will strike, and that’s precisely why you should not wait to develop a strategic estate plan. If you are a single parent without an estate plan in place or would like to update an existing one, contact Atlanta Wills + Trusts Law Group by Refeca Law LLC.