Did you know that the United States has the highest rate of children living in single-parent households? According to the Pew Research Center, nearly a quarter (23%) of U.S. children under the age of 18 live with one parent. This is more than three times the number of children from around the world. If your household falls into this category, ensure your estate plan properly accounts for your children.
“In many respects, estate planning for single parents is similar to estate planning for families with two parents,” explains SmolenPlevy founding principal Jason Smolen. But when only one parent is involved, certain aspects of an estate plan demand special attention.
Dan Ruttenberg, principal at SmolenPlevy explains “It is imperative for single parents with minor children to ask themselves the right questions when preparing their estate plans.”
Here are six questions to consider:
1. Are my will and other estate planning documents up-to-date?
If you haven’t reviewed your estate plan recently, now is the time to do so to ensure it reflects your current circumstances. You also need to review the beneficiary designations on your policies, retirement accounts and any other accounts.
“The last thing you want is for a probate court or incorrect beneficiary designation to decide your children’s future,” says Smolen.
2. Have I selected an appropriate guardian?
If the other parent is unavailable to take custody of your children should you become incapacitated or die suddenly, does your estate plan designate a suitable, willing guardian to care for them?
It is also important to determine if the guardian will need financial assistance to raise your children and provide for their education? If they do not need assistance, Ruttenberg suggests, “you might want to preserve your wealth in a trust until your children are grown.”
3. Am I adequately insured?
With only one income to depend on, plan carefully to ensure that you can provide for your retirement and your children’s financial security. Life insurance can be an effective way to augment your estate.
You should also consider disability insurance. Unlike many married couples, single parents generally don’t have a “backup” income in the event they can no longer work.
4. What happens if I remarry?
Will you need to provide for your new spouse as well as your children? Where will you get the resources to provide for your new spouse? What if you placed your life insurance policy in an irrevocable trust for your kids to avoid estate taxes on the proceeds?
Further complications can arise if you and your new spouse have children together or if your spouse has children from a previous marriage.
5. What if I become incapacitated?
It’s particularly important for you to include in your estate plan an appropriate directive to specify your preferences for the use of life-sustaining medical procedures and to designate someone to make medical decisions on your behalf.
You should also have appropriate powers of attorney or other estate documents that provide for the management of your finances during any period when you are unable to do so.
6. Should I establish a trust for my children?
Creating a trust can be one of the most effective ways to provide for children regardless of their age. Trust assets are managed by one or more qualified, trusted individuals or corporate trustees, and you specify when and under what circumstances funds should be distributed to your children.
A trust can be particularly useful if you have minor children. Without one, your assets may come under the control of your former spouse, the child’s other parent or a court-appointed administrator.
When to speak with an attorney
If you are or have recently become a single parent, it is critical to review and, if necessary, revise your estate plan.
About the Authors
Jason Smolen
Jason Smolen is a founding principal of SmolenPlevy. Smolen’s knowledge of complex estate and business issues has drawn the attention of ABC News, USA Today, E! Online, Realty Times and the Bank of America Small Business Online Community. Mr. Smolen is a graduate of the City College of the City University of New York and the George Mason University School of Law. Smolen also serves as a board member of a local citizens association and recently co-authored an article titled Why You Should Think About Spousal Limited Access Trusts (SLATS).
Daniel H. Ruttenberg
Daniel H. Ruttenberg, JD, CPA, LLM is a principal with the firm. Mr. Ruttenberg received his Bachelor of Science degree with a double major in Accounting and Finance from the University of Maryland. He earned his Juris Doctor with Honors from George Mason University School of Law and his Master of Laws in Taxation with Distinction from Georgetown University Law Center. Mr. Ruttenberg also served as the Director of the Fairfax Bar Association (FBA) for seven years. During this period, he was also elected president – the youngest in FBA history and served as a member of the Board of Directors for the Fairfax Law Foundation.
