An estate plan is especially important if you are a single parent or divorced.
If you’re married and your partner is also the parent of your child, then whether you have a Will or not, your spouse will inherit everything (under the laws of intestacy). If they are a decent person, which they probably are if you are still married, they would use that inheritance to provide for your child(ren).
When you’re a single parent, this is no longer a simple solution.
You probably do not want your ex to inherit your money.
But guess what?
Even if you have a divorce decree, your ex could get access to your money because they will most likely become the Guardian of your child.
You may be okay with your ex as the Guardian of your child. But do you really want them to have complete (and pretty much unfettered) access to the two million life insurance policy that you had for your child?
If the answer is NO (which it probably is), then you need to make sure that you have a Will that includes a Testamentary Trust for your child.
What is a Testamentary Trust?
A testamentary trust is a trust that is only created upon your death. It would allow for your assets to be placed in a trust for the benefit of your child(ren), with a Trustee managing the assets based on your express wishes.
The Trustee has a duty to manage those funds in a prudent way and to ensure that they are used in the best interest of your child. You can also leave specific directions to your Trustee, such as that the Trustee pay for bi-annual visits to grandparents who live abroad or pay for private school.
Finally, the trust can be drafted so that the principal of the trust will be distributed to your child in staggered distributions, as opposed to the full amount on their 18th birthday (which is what would happen if you do not have a testamentary trust).
But control over money is not the only problem.
What happens if you are a single parent and the other biological parent is either deceased or not around?
Then having a Will with the names of who you would like to be the Guardian of your child is paramount.
While the Court still has to approve those guardians, your wishes will carry a strong weight. Unless there is a serious problem with the guardians you name (alcohol or drug use or criminal record), then your wishes will most likely be respected.
Don’t assume that the grandparents will become Guardians. If the grandparents live out of state or do not speak English, there could be serious difficulty in getting them appointed as Guardians, unless you name them in a Will.
And what happens if you get disabled? (This is a BIG one.)
If a person becomes unable to make medical or financial decisions for themselves due to an accident or an illness, a Guardian will have to be appointed to make those decisions on behalf of the person. This is a costly legal process.
Unless – and here is the good news in all of this doom and gloom talk – you have signed a Durable Power of Attorney and an Advanced Health Care Directive.
Durable Power of Attorney
A Durable Power of Attorney allows for you to choose agents to manage your financial affairs if you are unable to do so. They can write bills from your account, apply for benefits, talk to insurance companies, even sell real estate. They have as much power as you elect to give them.
Advanced Health Care Directive
An Advanced Health Care Directive allows for the person you select as your health care agent to make health care decisions based on your best interests. If you do not sign An Advanced Health Care Directive California law allows for certain individuals to make decisions for you.
These individuals, in order of priority, are:
spouse (if not legally separated from the patient) or the domestic partner
an adult child
an adult sibling
and finally a close friend.
The problem, of course, is that the individual who may have standing under the law to act as your surrogate may not be the person you would have chosen.
And this is just the tip of the iceberg.
We all know family life is complicated. But this is one area where a little planning could go a LONG way to ease a potential mess.
Are all of your estate planning in place? If I’ve mentioned anything that you haven’t take care of yet – let’s talk.
Contact us and we will ensure that you and your children will be taken care of if something were to happen to you.