Estate Planning For Single Parents
If you're a single parent, your estate plan wouldn't differ too much from that of two-parent families. The fundamentals of estate planning will still apply. But when you're a single parent, getting your affairs in order and planning for the protection of your children and assets is perhaps all the more important. The following are key issues I emphasize to my single-parent clients when they are planning for their wills and trusts:
- Kids -- if you have a close friend or relative you trust, start talking to them about legal guardianship of your children.
- Pets - it may sound strange but if you and your children have a family pet, make sure your estate planning provides for the pet to remain with the children, and provide for that pet's upkeep and care as well. Losing a parent can be a terribly painful experience, but one which children (who are often amazingly resilient) can manage better if they have their beloved pets with them. You can set up a pet trust to ensure that this is possible for your children, and this should be part of your estate planning process.
- Money - make a list of all your assets and keep it updated. If you have life insurance, that's a major asset for your children, but bear in mind the death benefit is subject to estate tax (unless it's in an ILIT - an irrevocable life insurance trust). It's very easy to ensure that your kids get your life insurance - simply call your insurance carrier and make a beneficiary designation in their names. You can also make beneficiary designations for your retirement accounts (e.g. the 401k you have with your employer or the IRA that is your own retirement account). You want to make sure, above all, that your kids have liquidity (cash) to live on while your will goes through probate. Beneficiary payouts under life insurance and retirement accounts is a much more straightforward process and does not involve probate. Note: do talk to your CPA or tax adviser about taxes on this type of inheritance as there are taxes levied in certain situations.
- Real estate - some parents think that adding their children's names to the title deed of the family home is a no-brainer. While the intent is good, the reality is that there are tax implications (e.g. capital gain taxes, gift taxes) when you do so. Please consult your tax adviser or CPA before you make any such move.