9 Questions Single Parents Should Ask About Their Estate Plans
In many respects, estate planning for single parents is similar to estate planning for families with two parents. Single parents want to provide for their children’s care and financial needs after they’re gone. But when only one parent is involved certain aspects of an estate plan demand special attention. If you’re a single parent, here are nine questions you should ask:
1. Are my will and other estate planning documents up-to-date?
This assumes you already have a plan. If you don’t, then you need to get your estate planning done in a hurry. Tomorrow is promised to no man. If you have a plane but haven’t reviewed your estate plan recently, talk to your advisors to be sure it reflects your current circumstances. The last thing you want is for a court to decide your children’s future.
2. Have I selected an appropriate guardian?
If the other parent is unavailable to take custody of your children should you become incapacitated or die suddenly, does your estate plan designate a suitable, willing guardian to care for them? Will the guardian need financial assistance to raise your kids and provide for their education? If not, you might want to preserve your wealth in a trust until your children are grown.
When naming a guardian for your child, I recommend doing that in a separate document instead of your Will. If you change your mind it will be more expensive to change your Will than the designation of guardian document. Remember, that even if you name a guardian for your child(ren) in a Will or other document, that will not divest a surviving parent of their right to take custody of the child(ren). Also, if the other parent is deceased, be mindful of grand-parents competing for custody if you fail to name a guardian.
3. Am I adequately insured?
With only one income to depend on, plan carefully to ensure that you can provide for your retirement as well as your children’s financial security. Life insurance can be an effective way to augment your estate. You should also consider disability insurance. Unlike many married couples, single parents don’t have a “backup” income in the event they can no longer work.
4. What happens if I remarry?
Will you need to provide for your new spouse as well as your children? Where will you get the resources to provide for your new spouse? What if you placed your life insurance policy in an irrevocable trust for your kids to avoid estate taxes on the proceeds? Further complications can arise if you and your new spouse have children together or if your spouse has children from a previous marriage.
5. What if I become incapacitated?
As a single parent, it’s particularly important for your estate plan to include a living will, advance directive or health care power of attorney to specify your health care preferences in the event you become incapacitated and to designate someone to make medical decisions on your behalf. You should also have a revocable living trust or durable power of attorney that provides for the management of your finances in the event you’re unable to do so. Have you appointed an interim caregiver should you become incapacitated? Will your children go live with the caretaker or will the caretaker come live with them in your home?
6. Have I established a trust for my children?
Trust planning is one of the most effective ways to provide for your children. Trust assets are managed by one or more qualified, trusted individual or corporate trustees and you specify when and under what circumstances funds should be distributed to your kids. A trust is particularly important if you have minor children. Without one, your assets may come under the control of your former spouse or a court-appointed administrator.
7. Do I have an estate tax reduction strategy?
If your estate is large enough that gift and estate taxes are an issue, it’s important to begin tax planning as early as possible. As a single parent, you won’t enjoy the benefit of the unlimited marital estate tax deduction, so you’ll need to rely more heavily on other tax-reduction strategies. For example, you might take advantage of the currently $5.43 million lifetime gift tax exemption or the $14,000 annual gift tax exclusion to make regular tax-free gifts to your children or to a trust for their benefit.
8. Have I left written instructions?
Don’t force your children’s guardian or your other representatives to guess what you “would have wanted.” Include instructions in your Will or trust on anything from religious and educational preferences to moral or social values.
9. Can the other parent help?
If your spouse (or ex-spouse) is alive, is he or she willing to help care for your children or provide financial resources? If your spouse (or ex-spouse) is deceased, does his or her estate plan provide any financial assistance for your children?
If you would like further information or assistance, please contact Estate Planning and Elder Law Attorney, Antoinette Bone, at (817) 462-5454 or email [email protected].
To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances.
Nothing in this message is intended to provide legal advice. This message is for educational purposes only.