Modern times have definitely not helped the process of raising a child by yourself. With nearly half of all marriages ending in divorce, it isn't uncommon to have one parent with custody of the kids and the other legally obligated to provide child support. While traditionally this information was meant for single women, there are plenty of single dads out there who are also looking for estate planning advice.
The following five tips are estate planning recommendations from Wealth Management and are meant to give financial planning tips to parents raising kids on their own. In most US states, the spouse is usually first in line to make financial and health decisions, but for single parents this gets complicated. How is custody determined? Who manages money for the children and who takes care of them? For married couples, the choice is a lot easier, but what happens when a single parent dies? Estate planning, my friends, is so important...
1. Have you selected an appropriate guardian?
If you pass away or become incapacitated, and don't have a partner/spouse to take custody of your children, it's important that you choose a guardian for minor children - either in your family, or a close friend. However, it is important to make sure that the guardian you choose has the finances to support them (because odds are, that's a financial burden they just can't handle out of the blue). Life insurance allocated for a designated guardian is imperative.
2. Are you properly insured?
As a single parent, you only have one income to support yourself, save for retirement and secure your children’s financial futures. You must consider life insurance as a source of support for your estates to make sure that your loved ones are taken care. Additionally, consider disability insurance to cover your financial needs if you become incapacitated.
3. What if you become incapacitated?
Going along with the aforementioned statement, it is essential to have an advance medical directive and assign someone who you trust to make medical decisions for you when you are unable to make them for yourself. If your children are old enough (as in, more than 18 at the time of your death), they could handle this responsibility. Having the right estate documents are important to ensure continuity for you and your family if can no longer think for yourself (or them).
4. Have you considered establishing a trust for your children?
A properly created trust will ensure that your assets end up with your chosen beneficiaries, even with very specific wishes (i.e. your kids will only get college money if they choose to study a specific subject). In an ideal world, you should have a trust managed by a qualified third-party to minimize any intra-family conflicts. Additionally, a trust enables you to assign when and under what circumstances funds should be distributed to them, so they don’t come under the control of a court-appointed administrator or former spouse.
5. Is your will and other estate planning documents up to date?
Remember to update your beneficiaries as often as you experience major life events - like a divorce, remarriage, or the death of a spouse. Make sure it reflects your current intentions because you don't want a court deciding how your assets are distributed. And you don't want them going to a former spouse of course.
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