For clients with minor children, a comprehensive estate plan is more than just deciding what happens to the client’s stuff at their death. It is about securing their minor children’s future no matter what. This is even more important for your single clients who, for whatever reason, are tasked with raising and providing for their minor children alone. For these clients, it is crucial that they have a plan instead of leaving their children’s future up to state law and a judge.
Why Your Clients with Minor Children Need an Estate Plan
Care and Custody of Their Minor Children
One reason single clients with minor children should engage in estate planning is to nominate who will care for their children. Children under eighteen (or twenty-one depending on state law) do not have the legal ability to care for themselves (unless they have been emancipated). If a minor child’s parents die, a guardian needs to be appointed to take care of them. If the other legal parent is still alive, the surviving parent may be the one who will receive custody of the children. However, if there is no other legal parent, or if the children’s other legal parent cannot care for them, your client needs to have a plan in place. If your client does not have a plan, the judge will look to state law to determine the appropriate guardian. This may or may not be the person your client would have chosen.
How Your Client Can Nominate a Guardian at Death
There are different ways the client can nominate a guardian. First, the nomination can be made in a last will and testament (also known as a will). This allows the client to nominate someone to be the children’s guardian at their death, name the person to wind up their affairs (executor or personal representative), and state to whom and how their money and property will be distributed. Similarly, your client may use a pour-over will to name the guardian at their death. Unlike a will, a pour-over will names the client’s trust as the beneficiary of any money and property going through probate. Lastly, some states have a separate document that allows the client to name guardians for their minor children. Some people prefer to use the separate document because they can change their choice without having to update their entire will or pour-over will.
Naming a Decision Maker in Case of Emergency
While estate planning can be focused on death, it is also important that clients have a way to name someone to care for their children in the event they are still alive but unable to care for them. In addition to stepping in when the client is unable (referred to as being incapacitated), a separate document can be used if your client is traveling and needs someone to make decisions on the minor’s behalf. It is important to note that this document is only effective for a short period of time (six months to a year depending on the state). Also, there are some things the named person cannot agree to, such as the minor children’s adoption or marriage.
Managing Their Children’s Inheritance
Who will be in charge?
Minor children (unless emancipated) cannot handle their own financial affairs—they need an adult. Without an estate plan, if the client passes away, the other legal parent may be put in charge of managing whatever is left to the minor children. If the other legal parent is unable to manage the children’s inheritance, then the court will have to appoint someone. The client has the opportunity through their estate plan to nominate the person they want to control the money and property. Without an estate plan, the judge will have only the state law and the people before them to use in making the determination.
When and how will the children receive their inheritance?
If a client does not have an estate plan, the children’s inheritance will be managed for their benefit until they reach the age of majority, at which time it will be given to them outright. Although they will be legal adults, they may not be prepared for a large influx of money and property. Also, the client may have things they want the money used for. Using a trust allows the client to draft instructions for how the inheritance is to be used and to name who will be in charge of managing the trust. The client can create a revocable trust, or they can include these instructions in their will (known as a testamentary trust). The important distinction between these two options is that a will has to be filed with the probate court and the proceedings will be public and overseen by a judge. A properly drafted and funded trust and its management, however, can be conducted without probate, and no documents need to be made public.
Your Role
When it comes to helping single clients with minor children plan, you play a major role. As their trusted advisor and someone who meets with them regularly, you have the opportunity to review their current beneficiary designations and counsel them on whom to name as their beneficiary. Also, by showing an interest in the future of their accounts, you increase the likelihood of those assets remaining under your management. You also have the opportunity to review their current financial situation and any insurance they already have and discuss whether they have enough money or insurance to provide for their children in the way they want should they pass away unexpectedly. This can provide you with an opportunity to see additional financial products.
Let’s Work Together
We are passionate about protecting the next generation and helping parents continue their legacy. While we believe that estate planning should be a priority for everyone, it can be critical for single parents with minor children. If you are interested in discussing how we can partner to serve these clients, please reach out to me.
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