Single Parents and Estate Planning

The importance of having an estate plan as a single parent is discussed in this information. It emphasizes the need to ensure that minor children will be cared for if the parent is unable to do so. Creating an estate plan allows for the appointment of a guardian for the child and provides instructions on how money and property should be used for their care. Various options for nominating a guardian and managing the child's inheritance are mentioned. It is advised to choose a trustee wisely, whether it be a family member, friend, or professional trustee. Designing a personalized estate plan is crucial to ensure the best outcome for the child's future. Hello, today's topic is about being a single parent and the importance of needing an estate plan. If you have a minor child or minor children who depend on you for their survival, you need to make sure that they will be cared for if you are ever unable to care for them. By creating an estate plan, you can address your minor child's care and custody and provide instructions about how your money and property should be used for their care should something happen to you. Creating an estate plan allows you to name someone to care for your minor child if you are unable to. A minor child under the age of majority, 18 in the District of Columbia in Maryland, cannot legally care for themselves unless they have been emancipated. A guardian must be appointed to take care of the minor child if both parents have passed away or are unable to care for the child. It is important to note that if the other legal parent is still alive, that parent most likely will receive custody of the child. However, you need to have a plan in case there is no other legal parent or the other legal parent cannot care for the child. If you do not choose a guardian, a judge who does not know your child nor know you will look to the state law to determine the appropriate guardian who may not be the person you would have chosen. There are a few ways to nominate a guardian to care for your child after your death. The first and most common can be done in your last will and testament, commonly referred to as a will. In this document, you can name someone to be your child's guardian after your death. A person to wind up your affairs, an executive or personal representative, and you can also name the people to receive your money and property along with any instructions. Similarly, you may also use a poor over will to name a guardian for your child upon your death. A poor over will is typically prepared with a trust. A poor over will also allows you to name your trust as the beneficiary of any money and property that goes to the probate process. Lastly, some states have a separate document that allows you to nominate a guardian for your minor child. Some people prefer the separate document because they can change guardians without having to update their entire will or poor over will. While an estate plan usually focuses on planning for your death, it is also important to plan for a situation in which you are alive but unable to act or make decisions, for example being incapacitated. Including naming someone to care for your child temporarily. In addition to delegating your parental authority when you're unable to act, this document can be used if you're traveling and need someone to make decisions for your child. It is important to note this document is only effective for a short period, six months in some states, and your chosen person cannot agree to certain actions such as a child's adoption or marriage. There are certain rules regarding your child's inheritance, for example, a minor child cannot handle their own financial affairs, again, once again, unless they are emancipated. They will need an adult. If you pass away without an estate plan, the other legal parent may oversee managing the money and property you have left for your child. If the other legal parent is unable to manage your child's inheritance, then the court will have to appoint someone. The estate plan allows you to name the person you want to control the money and property. Without an estate plan, the judge can only use state law and the people who appear in court to determine who will manage the inheritance. If you do not have an estate plan, the child's inheritance will be managed for their benefit until they reach the age of majority, and then it will be given to them outright. Although they may be a legal adult, they may not be prepared for a large influx of money and property. Also, you may have certain things that you want the money to be used for. With a trust, you can draft instructions for exactly how you want the inheritance to be used as well as how it should be received. You can create a revocable trust or include these instructions in your will, known as a testamentary trust. The important distinction between these two options is that the will has to be filed with the probate court, and the proceedings will be public, and the testamentary trust will be overseen by a judge. A properly drafted and funded revocable trust, on the other hand, can be managed without probate and there are no documents that need to be made public. There are many options available to you when crafting instructions for how your child's inheritance should be managed and distributed. Your minor child can receive a percentage upon reaching a specific age. For example, at 25, they'll get 20%, and at age 30, they get another 20%, et cetera, et cetera. You can also structure your child's trust as an incentive trust to allow your trustee to give your child money only after meeting certain goals. For example, successfully getting into college or successfully completing post-secondary education or being sober for one year. Alternatively, you can leave the decision of how and when to give the funds exclusively up to the trustee's discretion. This is sometimes referred to as a discretionary trust. Because your child will not be guaranteed a specific amount of money or piece of property, the funds will be better protected from any future creditors or divorcing spouses that your child may have. However, when deciding to use a discretionary trust, it is important to choose your trustee wisely and provide clear guidance for the trustee to consider. When considering who to select as a trustee of your minor child's trust, you can choose a family member who knows the child and understands your wishes. If you do not have a family member that you would like to fill this role, you can look to close friends or a godparent. These people may already be a large part of your child's life and may understand your wishes. Lastly, if you do not have someone who you want to serve as a trustee, you can hire a professional trustee. They'll be aware that professional trustees charge for their services, and while all trustees are entitled to compensation, a professional trustee may be more expensive and have set fees. Although state law will provide your child with a guardian, someone to manage their inheritance, and a distribution plan for their inheritance, this is the least desirable result. You have the power to design an estate plan that is unique to your child's circumstances and allows you to choose the most trusted individual to guide them if you are no longer able to. I hope you've learned something new today. As always, if you want additional information or to discuss your own estate plan, call us at 301-892-2713, 301-892-2713, or you can reach us at our website, which is www.estatecast.com, www.estatecast.com. We know that life is precarious. Our goal is to give you peace of mind by living with your bags packed. We never know what tomorrow may bring, so let's get prepared.