Yes, estate planning is very important for single parents, as they are the individual who is primarily responsible for the care and upbringing of their child or children. Creating an estate plan can help a single parent ensure that their children are cared for when they pass away.
An estate includes all of an individual’s:
- Belongings;
- Property;
- Money; and
- Assets.
Creating an individual’s estate plan will involve creating a comprehensive strategy for managing and passing on an individual’s:
- Property they own;
- Stocks;
- Holdings;
- Cash;
- Savings;
- Insurance policies; and
- Health policies.
An individual’s estate plan should include details regarding how their estate should be divided and distributed to their beneficiaries, or the recipients of their property. Estate plans are important for individuals who wish to plan ahead for their future.
An individual who has a disability or has disabled beneficiaries may have to create a specific estate plan to meet those unique needs. It is also important for an individual to be aware of how the local laws regarding wills, trusts, and estates, or the local estate planning laws will affect their estate plan.
What About Wills and Guardianships?
A will is a legal document that an individual creates to specify who should inherit their property and assets when they pass away. An individual can include who they would choose as guardians for their child or children in their will.
Usually, a will is part of a comprehensive estate plan. Estate plans also commonly include other financial management instruments, which may include a trust or multiple trusts that may take effect while the individual is still alive.
Estate plans can be tailored to each individual based upon their own unique needs, assets, and desires for their estate. Estate plans include much more than just a will, if an individual wants to create one.
How Can Trusts and Asset Protection Help?
The next step for an individual who is creating their estate plan is to consider any assets that they wish to leave in a trust and to establish a trust for those assets. Trusts are established by grantors, or estate owners who:
- Assign any trustees and beneficiaries;
- Create guidelines for the trust; and
- Move assets or gifts into the trust.
A trustee is an individual who is responsible for managing the property that is contained in the trust. A beneficiary is an individual who will receive the property that is held in the trust.
Trusts may be used to transfer property to recipients before the owner passes away. This can be used as a tool to avoid certain taxes as well as to make the overall estate distribution process easier and more simple after the individual passes away.
Asset protection involves protecting assets from potential risks such as lawsuits, bankruptcy, and other types of liabilities. It is a proactive approach for an individual to manage their financial situation and their future needs.
Assets that an individual may need to protect include:
- Property assets, such as real estate or land;
- Retirement assets, including IRAs, 401ks;
- Business interests, such as LLCs or corporations;
- Insurance;
- Cash;
- Jewelry; and
- Automobiles.
Asset protection planning is the creation of a plan that helps protect an individual’s assets from being seized by creditors. An asset protection strategy can help an individual keep what they have worked so hard for and make it available to your children in the future, which is very important for a single parent.
If they are not protected, assets including property and investments may be seized in the case of bankruptcy if they are not carefully protected. Asset protection planning is a legal practice that helps individuals protect themselves from losing the things that are most important to them.
Are Beneficiary Designations Important?
Yes, beneficiary designations are an important part of any estate plan. Factors that an individual should consider when they are creating their estate plan include:
- Who will receive their property;
- The type of property that is involved; and
- The local state laws governing wills, trusts, and estates.
An individual should consider who they want to receive their property, or to be their beneficiary or beneficiaries, when they pass away. Beneficiaries are individuals who receive portions of assets and property.
In most cases, this will include close family members, including:
- A spouse;
- Children; and
- Siblings.
If an individual is a single parent, their beneficiary will most likely be their child or children. Typically, an individual will designate their children as their beneficiaries in their will document.
What About Powers of Attorney and Healthcare Directives?
Other important components of a comprehensive estate plan include powers of attorney and health care instructions. A power of attorney designates an individual who will represent the creator of the document when they can no longer manage their own affairs.
Powers of attorney allow estate owners to designate another individual, referred to as the agent, who can make legal decisions on their behalf. An individual can create different types of powers of attorney, such as medical and financial.
Healthcare directives, or healthcare instructions, are another important component of an estate plan. These documents are used when an individual is incapacitated and provide instructions regarding:
- Whether or not to undergo a specific type of surgery;
- Whether the individual is to be placed on or taken off of life support;
- Whether the individual should take certain medications or undergo various forms of treatment; and
- Various other types of healthcare-related decisions.
Is Saving for Education and Long-Term Planning Important?
Yes, it is very important for any single parent to save for their children’s future education and engage in long-term financial planning. These steps can help ensure that an individual’s child is prepared for their future when their parent passes away.
A single parent bears an enormous amount of responsibility that rests solely upon their shoulders. Because of this, single parents should reach out to helpful individuals and professionals who can help them plan for their future, including attorneys.
How Often Should I Review and Update My Estate Plan?
Once an individual has taken the important step of creating an estate plan, they should ensure to keep it updated, including their will. An individual’s will is the primary record of your estate plan, which describes their final wishes, including describing which individual receives each specific item or exact funds at the time of their death.
If an individual creates their estate plan early in their life, there are many events that may require an update to their plan. For example, if an individual has minor children, they should outline who should be granted custody of their children when they pass away.
Once an individual’s children reach adulthood, however, their will may not need the provision concerning guardianship. An individual can update their estate plan at any time and for any reason.
An individual should ensure to update their estate plan when major changes occur, such as a death, obtaining new property, or other similar events.
Should I Consult with a Professional for Advice?
Creating an estate plan can be an intimidating undertaking. It is important for a single parent not to try to handle everything on their own, especially when there are so many resources that may be available to help.
An individual can consult with professionals, such as accountants, lawyers, and other professions, who can take some of the weight off of their shoulders. Although it may feel intimidating or overwhelming, recognizing that the end goal of estate planning is to make everything easier and more straightforward for everyone involved.
Having an estate plan legally and adequately set up will save a single parent and their children from chaos and anxiety that may arise when they pass away.
Should I Consult with an Attorney?
If you are a single parent who is considering creating an estate plan, it is essential to consult with a family lawyer. Your lawyer will be able to advise you regarding the different estate planning tools that will best fit your needs.
Your lawyer will also draft any estate planning documents you determine will suit your situations. In addition, your attorney can safely store these documents for you for use in the future.
