Estate planning is simply more important if you're a single parent. You don't have a surviving spouse to rely on to raise your child should something happen to you.
If you’re married and your partner is also the parent of your child, then whether you have an estate plan or not, your spouse will inherit everything under the laws of intestacy (i.e., dying without an estate plan). This is what most people want to happen because 99%+ of the time the surviving spouse would use that inheritance to provide for the child.
When you’re a single parent, things are no no longer so simple.
You probably do not want your ex to inherit your money. Maybe you're not even comfortable having them raise the child for whom you have custody.
Here’s How Things Really Work
Even if you have a divorce decree, your ex could get access to your money because they will most likely become the Guardian of your child.
You may be okay with your ex as the Guardian of your child. But do you really want them to have complete (and pretty much unfettered) access to the three million dollary life insurance policy that you had intended to be used soley for your child?
Assuming the answer is NO (which it probably is), then you need to make sure that you have an estate plan that includes a Testamentary Trust for your child.
What is a Testamentary Trust?
A testamentary trust is a trust that is only created upon your death. It allows for your assets to be placed in a trust for the benefit of your child, with a Trustee of your choosing managing the assets based on your express wishes.
The Trustee has a duty to manage those funds in a prudent way and to ensure that they are used in the best interest of your child. You can also leave specific directions to your Trustee, such as that the Trustee pay for bi-annual visits to grandparents who live abroad or pay for private school. A Testamentary Trust is extremely flexible.
Finally, the trust can be drafted so that the principal of the trust will be distributed to your child in staggered distributions, or remain in trust forever, as opposed to the full amount being deposited in their bank account on their 18th birthday (which is what would happen if you do not have a testamentary trust).
Control and access to money is not the paramount concern.
What happens if you are a single parent and the other biological parent is either deceased or not around? What if the biological parent has addiction or other issues which render them unfit to raise the child?
Then having an estate plan with the names of who you would like to be the Guardian of your child is paramount. Money comes and goes but nothing is more sacrosanct than raising a child. Your child.
While the Court still has to approve your choice of guardians, your wishes will carry much weight. Unless there is a serious problem with the guardians you name (alcohol or drug use or criminal record), then your wishes will likely be respected.
Don’t assume that it's a foregone conclusion that the grandparents will become Guardians. If the grandparents live out of state or do not speak English, there could be serious difficulty in getting them appointed as Guardians, unless you name them in your estate plan.
What happens if you get disabled?
When you're single and do not have a spouse to make decisions on your behalf things become tenuous. If a person becomes unable to make medical or financial decisions for themselves due to an accident or an illness, a Guardian will have to be appointed to make those decisions on behalf of the person. This is a costly legal process. And who is to say that the Guardian will make the decisions you want them to make on your behalf?
Unless – and here is the good news in all of this doom and gloom talk – you have signed a Durable Power of Attorney and an Advanced Health Care Directive.
Durable Power of Attorney
A Durable Power of Attorney allows for you to choose agents to manage your financial affairs if you are unable to do so. They can write bills from your account, apply for benefits, talk to insurance companies, even sell real estate. They have as much power as you elect to give, or not give, them.
Advanced Health Care Directive
An Advanced Health Care Directive allows for the person you select as your health care agent to make health care decisions based on your best interests. If you do not sign An Advanced Health Care Directive New York law allows for certain individuals to make decisions for you.
These individuals, in order of priority, are:
Child Protection Planning Kit
At Katzner Law Group, we will guide you in crafting a plan that will protect your children for the unexpected in life. We understand you want peace of mind knowing that you minor children will be raised by those you choose who share the values you cherish most. With this in mind, when we prepare an estate plan for the parent of a minor child we also provide, free of charge, a Child Protection Planning Kit
The kit contains:
And this is just the tip of the iceberg…
We all know family life is complicated. But this is one area where a little planning could go a LONG way to ease a potential mess.