First: Don’t delay the need for estate planning for your peace of mind and your children’s sakes. The single-parent family is a fact of life today. The U.S. Census Bureau released a report in November, 2009 called “Custodial Mothers and Fathers and Their Child Support: 2007”, there are about 80 million children under 21 in the United States, and about 22 million of these children are being raised in a single parent household. http://www.census.gov/prod/2009pubs/p60-237.pdf These single-parent households are economically unique, especially when it comes to protecting dependents from financial uncertainties. That is because, unless there is an absent parent providing support, economic security hinges on the custodial parent’s income. This creates an at-risk situation. The reason: the death of the custodial parent will almost certainly lead to the end of the existing family unit. If you are a single parent, your premature death could have consequences for your children in several ways beyond the emotional loss of a parent. To help protect your children, you should consider the following:
- Make sure your will is up to date. Otherwise, everything involving your estate and your children’s financial future may be decided by a probate judge.
- Select a guardian for minor children and do so with great care. Select someone who is capable and willing to take on the tremendous responsibility of raising your children if anything should happen to you. Make sure guardians understand that this is not a ceremonial honor (such as becoming a godparent), but the acceptance of a legal responsibility. Talk to your attorney about drafting a guardianship document and making it part of your will.
- Leave written instructions regarding everything from how you want your children raised (religious preferences, college plans, etc.) to how you want assets managed and used to benefit and protect your children. These will serve as guidelines to help those who assume the responsibility of raising your children. Put these instructions in your will.
- Make sure your children’s future needs are funded. Life insurance can provide the funds to raise your children and help fund their education. (Note: Do not name minor children as beneficiaries. Instead, consider using a trust. See the following point.)
- Make trust arrangements — and pick a trusted advisor as trustee — so your assets are managed according to your wishes for your children’s benefits. Talk to your attorney about the
However, the most essential estate planning document that anyone can benefit from is a power of attorney and/or advance medical directive. Once you turn 18 years old, your parents may no longer make medical decisions on your behalf unless you consent to this arrangement. If you want to have control over who can make medical and financial decisions on your behalf in the event that you can no longer do so for yourself, it is important to draft a power of attorney. The other critical document you will likely want to draft is a basic will. Even if you do not have many financial assets, chances are that you have some personal property of sentimental value. If you want to ensure that this property is distributed according to your wishes upon your death, you will need to draft a legally enforceable will. Here are three estate planning documents that you’ll probably want to consider:
- Power of attorney. Powers of attorney generally grant family members or loved ones the power to make certain decisions for you. There are three types of power of attorney, each of which can be an important tool in the estate planning toolkit. The general power of attorney grants its holder power over a broad range of legal, financial, and medical decisions. The durable power of attorney is used to give its holder the power over medical or financial decisions in the event the grantor is incapacitated. A special power of attorney is used to grant the power for a particular business transaction.
- Advance medical directive. Also known as a living will, an advanced medical directive dictates the type of life-prolonging treatment an individual wishes to receive in the event she’s unable to communicate her desires. For example, an advanced medical directive could allow an individual who does not wish to be kept alive in a vegetative or irreversibly comatose state to ensure that those wishes are honored.
- Basic will or trust. A basic will is the most common way for people to direct the distribution of their estate — real estate, money, possessions, etc. — after they’re deceased. Increasingly, however, wills are being augmented, or even replaced in some instances, by the use of trusts. Trusts are instruments created either during a person’s lifetime, or in a person’s will, that grant rights in that person’s property to others known as beneficiaries. There are a wide variety of trusts, offering a wide range of potential benefits, from tax-savings to avoiding probate.
For help with these documents and to learn more about other tools that may help you accomplish your estate planning goals, contact Paul A. Ksicinski.