10 Estate Planning Steps for Single Parents
1. Make a list of assets and debts.
2. Choose a child guardian and property guardian.
3. Meet with an estate planning attorney to discuss estate planning forms such as a will, trust, power of attorney, and advance directives.
4. Meet with a financial planner regarding beneficiary designations on IRAs, 401Ks, college savings plans, UTMAs or UGMAs, annuities, other investments, and life insurance policies.
5. Buy life insurance or increase death benefits under existing policies if necessary.
6. Make a last will.
7. Establish and fund a revocable living trust or another type of trust if recommended by your attorney.
8. Set up a pet trust or pet protection agreement if you have pets or animals.
9. Execute a durable power of attorney for finances.
10. Make a living will and health care power of attorney.
How to Name the Right Beneficiaries
While most single parents naturally want their property to pass to their children when they die, you should not leave property directly to minor children. To ensure the money and other property you leave behind for your children is immediately available to take care of them and is not consumed by unnecessary attorneys’ fees, make sure you make the right beneficiary designations.
Life Insurance.Life insurance should be purchased to provide for minor children until they are at least 18, but do not name your child as beneficiary of the life insurance policy. If you do, the life insurance company will not pay the proceeds to a minor child and will require an expensive court process to appoint a guardian for the child’s property. In the meantime, the policy proceeds will be tied up and unavailable to pay your child’s living expenses. After a guardian is appointed, a lawyer is usually required to request disbursements. To avoid this and ensure the proceeds are immediately available to support your child, name the revocable living trust as beneficiary of the life insurance policy. The trustee of your living trust can manage all assets in the trust for your child’s benefit.
IRA’s. Determining who to name as beneficiary of your IRA involves complicated tax planning issues. As a single parent, your options for IRA beneficiary choices include your children or your revocable living trust, among others. There are pros and cons to each choice. For assistance naming beneficiaries of your IRA, consult a tax professional or financial advisor that understands your estate planning objectives.
529 College Savings Plans. If you have a 529 plan account to save for your child’s college expenses, you should name a successor owner on the account. You should name someone you trust completely to use the funds solely for your child’s education. If you die or become incapacitated, the successor owner has the right to do anything he or she wishes, including change beneficiaries and withdraw the funds. You may name the same person you chose as property guardian and trustee of your living trust to be the successor owner of the 529 plan account. While many 529 plans allow you to name a trust as the successor owner, the tax and legal issues that must be addressed when a trust becomes the owner of a 529 plan usually make it an undesirable option, although there are advantages to holding a 529 plan account in the name of a trust in some circumstances. If you need to name a trust as the account owner because you have no person you trust to serve as the successor owner, consult your estate planning attorney.
If you are unsure what form you need to complete to name a successor owner, contact the institution that holds your 529 account. When completing 529 forms, remember your child is called the beneficiary and the person you want to take over the account in the event of your death or incapacity is called the successor account owner or survivor.
Make Sure Your Children Are Not Separated From The Family Pets
After the loss of a parent, a child relies on all that is familiar as a source of comfort. This includes family members, friends, teachers, and pets. If your child is attached to your family pet, you may want to ensure your child’s dog, cat, bird or rabbit will still be in his or her life after you’re gone. Talk to the person you have chosen to be your child’s guardian and determine if they can be a pet caregiver. If this is not an option, talk to other family members and friends that might be able to care for your pet. Remember the law views animals as property and will treat them as such in the probate of your estate. To make sure your pet doesn’t end up in a shelter or euthanized, you should execute a pet trust or take other steps to ensure your pets are cared for in an emergency.
Estate Planning, Wills, and Trusts for Single Parents
1. As a single parent, you must make estate planning a high priority. If your children do not have a second parent to rely on for their care and financial support, it is even more critical you take steps to provide for them in the event of your death or incapacity.
2. If you die without a will that names a guardian for your minor children, a court will appoint a guardian and may grant custody of your children to someone of whom you disapprove.
3. In the event of your death, your child’s biological father or mother, or your ex-spouse, may be granted custody. If you are concerned about this, consult an attorney to discuss your options.
4. Minor children are not allowed to take ownership of assets beyond a minimal amount. If you fail to make informed estate planning decisions when naming beneficiaries of life insurance policies, bank accounts, retirement accounts, etc., a court will appoint a guardian of the estate to oversee property inherited by your children. Going to court to get property released or expenditures approved when a court-appointed guardian is involved requires an attorney and is expensive. Attorneys’ fees, court costs, and related expenses are paid by your estate. By executing the right estate planning documents, you can avoid this and ensure that money left to your children is used for their benefit rather than to pay attorneys’ fees.
5. If you become disabled or incapacitated, the lives of your children will be severely affected if you have not signed a durable financial power of attorney. If you are unable to communicate, pay your bills, and manage your other finances due to a disability or incapacity, your family or friends would have to go to court to obtain a conservatorship, unless you have named someone to serve as your agent in a financial power of attorney.
Estate Planning Guide for Moms
If you are a Mom and want to make sure your children are protected if something happens to you, get a copy of The Mom's Guide to Wills & Estate Planning. It covers all the essential issues for parents, such as naming a guardian, making a will, deciding whether you need a living trust, naming beneficiaries on retirement accounts, buying life insurance, how to set up pay on death accounts, and appointing an agent to manage your financial affairs if you become incapacitated. If you have known for awhile that you need to make an estate plan, this guide offers the inspiration you need to get it done.
The Mom's Guide to Wills & Estate Planning includes several estate planning worksheets, including an inheritance planner. Written in a clear, easy to read style, this guide is one of the best selling estate planning books written specifically for mothers. The Mom's Guide to Wills & Estate Planning is available on Amazon.com.
How to Choose a Guardian, Property Guardian, and Trustee
When setting up your estate plan as a single parent, you need to choose someone to raise your kids, called a guardian. You also need to select someone to manage your child’s trust property, called a trustee and to manage property passing to your child through your will, called a property guardian. For information on how to make this difficult decision, refer to our page on Guardianship.
Making a Will, Living Trust, and Power of AttorneyRevocable Living Trust. By establishing a revocable living trust for your minor children, your assets in the trust will avoid probate and immediately be transferred to your trustee, allowing them to be used for the support and care of your children rather than being tied up in a lengthy probate proceeding. A living trust also allows you to define how you want trust property used, such as for your child’s education, medical treatment, travel, living expenses, clothing, etc. Because minor children cannot assume control of their own property, having your assets transferred to a living trust allows the trustee to manage the property and control disbursements until your children reach the age they are to receive the property as specified in the trust. If you don’t want your children to receive the property in a lump sum, you can also include provisions to have their inheritance distributed in increments at certain ages.
When you make a living trust, you can name yourself as the original trustee and name a successor trustee and alternate successor trustee to manage the trust after your death. You can name your children as beneficiaries of the trust. After executing the trust, remember to fund it by retitling assets in the name of the trust.
Pour-Over Will. Making a will is the most important estate planning document for a single parent because it allows you to name a guardian for your children. Although it is usually desirable to have all your assets pass through your living trust rather than your will to avoid probate, a pour-over will also provides for the distribution of any property in your estate that is not titled in the name of your living trust at your death. By making a pour-over will, you can name a property guardian to oversee any property that passes to your children through your will. When executing your will, make sure you have named a guardian for your children and a property guardian.
Durable Financial Power of Attorney. By executing a financial power of attorney, you can appoint an agent to handle your finances if you become disabled or incapacitated due to an accident or illness. The agent will be authorized to pay bills, maintain your home, pay insurance premiums, deposit checks, collect income, file claims on your behalf, and keep your financial affairs intact as much as possible for you and your children. Sometimes having an agent who can act for you promptly in these circumstances can prevent financial disasters such as home foreclosure, loss of insurance or credit being ruined.
Single Parents with Large or Complex Estates. The estate planning tips for single parents featured on this page do not include certain estate planning strategies that should be considered by wealthy individuals or parents with complicated issues in their estate. If you have a sizeable net worth and your estate may be subject to estate taxes or gift taxes, consult a tax advisor and an estate planning attorney before preparing your estate plan.
This is not an exhaustive list of the types of trusts and other estate planning devices that may be appropriate for single parents. To learn all your estate planning options, meet with a lawyer.
. It covers all the essential issues for parents, such as naming a guardian, making a will, deciding whether you need a living trust, naming beneficiaries on retirement accounts, buying life insurance, how to set up pay on death accounts, and appointing an agent to manage your financial affairs if you become incapacitated. If you have known for awhile that you need to make an estate plan, this guide offers the inspiration you need to get it done.