Single Moms Guide to Estate Planning…

Ugh! I know this isnt the most popular topic…but you need to read this article and take action, none the less. You are the sole provider for your family, and you must be sure that if , Lord forbid, something happens to you….your kids, your money, and your assets dont go to the wrong people. Girlfriend, read….and take note, and then TAKE ACTION.

The Single Parents Guide to Estate Planning

As a single parent, estate planning becomes even more important that your dual-parent peers. Why? Because in the event of your death when there is not proper legal and financial structure in place, a governing body will be left to decide the custody and guardianship of your children as well as the division of your assets.

If you became a single parent due to a breakdown of relationship, your former spouse can petition the decision-makers for custody and in most cases, will be awarded it, but what happens when there is no former spouse for any of the myriad of reasons people become single parents? If you were widowed, decided to use the services of an anonymous donor or simply cannot locate the other parent of your child, there may be issues with finding someone to care for your family, should you pass away. Worse yet is the thought that an unfit or abusive former spouse could retain guardianship.

To make sure that your family is taken care of should you not be there for them, the way you’d like them to be, proper estate planning is paramount to your own piece of mind. Some important things to do:

Ensure that your current custody and guardianship agreements and all associated court orders of all children are filed with a governing body.

If there is no formal agreement or court order in place, take the necessary steps to get one. Not having a legal framework for custody can lead to a whole host of problems in the unlikely event that you are not able to speak on your behalf.

An example: Remember that missing spouse? What happens if that person, who has a history of violence, irresponsible behaviour or even alcohol or drug abuse petitions for custody? That might not be your former partner, but it happens to some single parents prior to their death for a multitude of heinous reasons.

Decide who will care for your children in the event of your death.

Make sure that you have permission from this person or persons and just to be safe, elect a back up. What happens if your primary choice pre-deceases you or worse, you pass away in each other’s company?

You need to make sure that the person you want to care for your family will be able to in all aspects – that their health is good, they can handle any time or financial burdens that come with a pre-packaged family, they even want to be named the guardian of your children.

Also decide who you don’t want to care for your children so that you can communicate to your lawyer why you think it inappropriate, else your family may end up with the exact person you think the worst choice possible.

Assess your assets and decide who will (and can) get what.

Assets include savings, stocks, insurance plans, and the assets of your minor children, of which you are the trustee until their age of majority.

Also look at your liabilities, meaning debts and pre-planned future payments. The best thing you can do is limit or pay down your consumer debts, mortgage and long-term leases so that your estate is comprised mostly of income, assets and only the liability of taxes on your estate after your death. This will not only make things much easier on the executor of your estate, but also allow a more holistic picture of what finances exist that your children will be supported with.

Plan for your estate’s financial needs.

Your estate needs to pay for funeral costs and taxation after other liabilities,before you can consider the needs of your family. It seems like a great plan to have your house sold to free up liquid assets, but if the tax fall from any income your estate would make from the sale brings on a burden, it’s not worth it – better to have the house paid for so that your children and their guardian can live rent free and use their money to pay for other expenses.

Take steps to ensure your children’s economic standard of life is affected as little as possible.

You don’t need to save millions of dollars – to be honest, even if your children are young toddlers, you’ll ideally provide enough liquid and locked in assets to provide for their current (or slightly better) standard of life. You may want to pay for their education as well, but will a host of scholarships, bursaries, personal and Government loans out there, you could put it on the back-burner. The goal is to provide stability to your children, while not setting their new guardian up for an economic impossibility.

Think of how much rent or mortgage costs will tally to, less what your elected guardian is used to paying. How much you typically spend on groceries. What primary and high school educations may cost, should you children attend private schools. Clothing, entertainment, extracurricular plans and the big one childcare.

Start a rainy-day fund.

This extra money can be put aside every pay check, before you even see your bank balance via automatic transfers. After a short period, you won’t even miss the 5-10% of your income that you have set aside. Once there is enough money just sitting there, doing nothing, consider what types of investments you could put it into, so that it gains income via interest but is still available in a relatively short period of time, should an emergency arise. Using an investment vehicle such as a mutual fund will generally allow for slow-steady gains over a long-term amount of time, as well as add in the amazing benefit of compound interest.

Compound interest basically allows you to earn interest on the principle investmentand the interest that’s been earned on it, already. An example:

In Month 1, you invest $100.

In Month 2, you invest another $100 and earned interest of $5 (five percent of Month One’s investment), bringing your account balance to a total of $205.

In Month 3, you invest another $100 and earn interest on the previous balance,including the interest you’d already earned of $10.25 (also 5%).

It’s not much, but by Month 6, for instance, you’ll earn over $80 in interest on a $600 investment – that’s about 13% interest paid on an investment with a 5% interest rate. See the benefit? Picture that over a few years or more and you’ll understand why it’s such a good idea.

Insure everything necessary, but don’t over-insure.

Again, you want your estate’s needs and your children’s futures to be economically taken care of. This means using savings, investments and other assets, and insurance to put money in the pockets of those who require it.

  • If you’ve a mortgage, consider mortgage insurance so that, should you pass on, your house is paid off partially or in full.
  • Life insurance is very important, unless you’re in such a financial position that you’ve got enough liquid assets to cover the needs of your family and estate. If you do, skip out on life insurance – you don’t need it. If you’re not that economically comfortable and if your employer offers you a plan for free or at reduced rates, take it! Shop around for good rates and flexible renewal policies.
  • Consider credit insurance as well, if you normally carry a lot of consumer debt. Better yet, use the would-be insurance premiums to pay down your debt! If your credit card provider(s) offer you free insurance though, take it!

Meet with legal counsel to establish a plan and file documents.

Let your lawyer know all potential issues, your ideals for your family’s continuation and all assets and liabilities in your own and your family’s name. Put everything on the table because it’s their job to help you negotiate between what you’d like, what could happen and how to proactively protect and plan for bumps in the road.

Also let your lawyer know who you’ve chosen (who has agreed) to act as executor of your estate. If you cannot find someone appropriate or don’t wish to put that bearing on anyone you know, you can generally have your lawyer act as executor.

Your lawyer will, upon your direction, register your will with the governing body applicable. This is great because even if your lawyer disappeared or pre-deceased you and there went all of their files with them, it’s on record what you intended and how to undertake it.

With your will include an updated statement of worth, listing all assets and liabilities so that should it become necessary, every detail is documented. Update this statement often and forward the updated copies to your lawyer as well.

Also reassess your will with every life change you deem worthy. If you have more children, you’ll want to add in this new brood; if you marry, you may want to give your new spouse power and finances previously awarded elsewhere. Make sure to review your will yearly, regardless of no changes taking place – just for affirmation.

Keep a back-up somewhere safe.

Have would own copy of your will and net-worth statement somewhere away from potential damage. A good place to consider is a safety deposit box. This gives you access to it, without risking it’s destruction from fire or flood, or theft.

Keep in mind that just because you’re close with the rest of your family, it doesn’t mean that they will be awarded your estate or with the care of your children if you have no will. In General, a court will freeze your assets and make moves to find suitable temporary care for your family while they work on a decree of what (and who), goes where.

Making sure that you’ve addressed all of the potential issues will be a weight off of your shoulder, as well as those of anyone who will be affected by your possible early death.

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