For single parents, it’s important that we celebrate your dedication (self-sacrificial efforts to care for their children’s needs) and encourage family members, friends, and communities to help provide an optimal environment for your children. You should feel proud of your efforts to nurture and care for your children. Here are a few additional things you can do to provide for your children’s future that you may not have considered.
Name a Trusted Adult to Be Your Child’s Legal Guardian
If your children’s other parent is willing and able to care for them if you pass away unexpectedly, he or she will likely be given physical custody of the children and responsibility for their care. In the case of single parents, however, the other parent often may not be able or willing to take on this role. This is why it is crucial for you to name a guardian who will step into your shoes to provide day-to-day care for your children if something happens to you.
If you do not name a person you trust, a court will step in to appoint someone. Because the person the court chooses to be your children’s guardian may not be the person you would have chosen, it is vital that you designate this person in advance. You can name a guardian in your Will (in some states, a separate document can be used specifically for this purpose).
Although the court still has the authority to appoint the guardian of your child, courts most often defer to wishes of the parent that were stated in advance.
Keep These Things in Mind When Choosing Your Child’s Legal Guardian:
- Does your chosen guardian know and share your values and parenting style?
- Does your chosen guardian have the energy and stamina needed to care for your children?
- Does your chosen guardian have the time to be an involved caregiver?
- Will your chosen guardian require your children to relocate?
- Do you want more than one guardian to care for multiple children, and do you prefer that your children stay together?
Weighing the importance of these considerations is central to deciding who will care for your children when you cannot.
Consider Creating a Visitation Plan for your Child’s Grandparents
If you have named someone other than a grandparent (your parent) to be your children’s guardian, it is important to specify in your estate planning documents whether you wish the grandparents to be able to visit with your children. While you are living, it is your fundamental constitutional right to determine whether, and how often, your children will see your parents (their grandparents). However, when you pass away, grandparents may have a right to see your children. Every state has enacted a grandparent visitation statute, and they vary in how permissive or restrictive they are.
Some statutes only allow grandparents to obtain a visitation order when the children’s parents have separated, divorced, or one or both of them have died. Others are less restrictive and allow grandparents to obtain a visitation order even if the parents are still married and are both still living. Fortunately, both types of statutes require visitation not to interfere in the parent-child relationship and to be in the best interests of the child.
Consider Ways to Preserve Assets Given to Your Minor Child
Minor children lack the legal capacity to sign contracts (for example bank account agreements) so your minor children cannot own money or property on their own. Fortunately, there are ways to preserve assets your children receive during their minority until they are legally old enough (and presumably mature enough) to manage their assets themselves.
1. Create a Custodial Account for Your Child’s Inheritance
If your children are minors, you can establish a custodial account to hold an inheritance under a law called the Uniform Transfer to Minors Act or the Uniform Gifts to Minors Act. If you do not appoint the custodian, the court will appoint someone to control and manage your children’s inheritance until they reach the age of majority (again, minors cannot legally own money or property on their own).
A custodian will manage the funds in the account for the benefit of your children, but the downside is that when they reach the age of majority (often at 18 or 21 years of age, depending on applicable state law), the funds will be distributed to them in a lump sum. At that point, they can spend the money as they wish, which may not be optimal for a young person who is not yet mature enough to make prudent financial decisions. In addition, any present or future creditors could try to reach your children’s inheritance to satisfy their claims.
2. Create a Trust for Your Child’s Inheritance
A Trust is often preferred over a custodial account because it is more flexible and can be designed to protect the funds against your children’s future creditors and even your children’s own imprudent spending. You can name someone as trustee who is adept at handling mone to manage and disperse the funds for the benefit of your children if you die before they reach adulthood (or whatever age you decide the funds should be distributed to them). This can be the same person who will act as the children’s guardian, or a different person if you do not trust the guardian (e.g., an ex-spouse) to handle the money you have left to your children.
If you would like to set up a Trust that can be used to manage your money and property for your children’s and your benefit during your life, you can establish a Revocable Living Trust with yourself as the trustee. If you become unable to manage the funds during your life, your successor trustee can step in to manage and/or distribute the funds for your benefit (and your children’s) during any such period of your incapacity. In addition, this type of trust will remain in effect when you pass away, and the successor trustee you named can continue to manage the funds and make distributions for the benefit of your children.
The option of including provisions in your Will for establishing a Trust at your death (known as a Testamentary Trust) is often less preferred. This type of trust will not help if you become unable to manage your own affairs because it comes into effect only upon your death. In addition, it will not be funded until your Will has been probated, a court-supervised process that can be expensive and time-consuming. Also, the management and distribution of funds from a Testamentary Trust may also be subject to ongoing oversight by the Probate Court.
In contrast, a Revocable Living Trust is much more flexible. The terms can specify the purposes for which the trust funds can be used, how and when the trustee should make distributions, and, if you so choose, the age at which you would like the trust funds to be fully transferred to your children – which does not have to be at the age of majority. You can choose the type of distributions you believe are best for your children. Some parents give the trustee discretion to make distributions for specific purposes, such as the children’s health, maintenance, education, or support, or even for a down payment on a house or to provide funding for the child to start a business. Other parents give the trustee complete discretion in making distributions for the benefit of the children. The timing of distributions, which can be designed to meet your particular goals, can also be spelled out in the trust (e.g. one-third at the age of 35, one-half at the age of 40, and the remainder at the age of 45).
Moreover, if you have more than one child, you can specify whether distributions should be equal or whether a greater portion of the trust funds should be distributed for the benefit of particular children (e.g., children with special needs or younger children who did not get as much financial assistance from you while you were alive). Finally, a Revocable Living Trust also enables you to address specific issues that may be of concern. For example, you can indicate whether you would like a home you own to be sold, or if you prefer for the children’s guardian to move into the home (so they will not have to relocate). If your home is not sold, the terms of the trust can also indicate who will be responsible for paying the real estate taxes, utility bills, and maintenance expenses. The home is a particularly complex issue to consider, as there are often emotional ties and memories connected to it, as well as ongoing costs, and frequently, a mortgage. As experienced estate planning attorneys, we can help you think through the best course of action for your family.
Contact Us Today to Create an Estate Plan That Benefits Your Child
As a single parent, you can gain substantial peace of mind by creating an estate plan that ensures your children will be properly cared for (both physically and financially) in the event that something happens to you while they are still too young to take care of themselves. Please call our office or contact us online today to schedule a consultation.