Single Parent Planning

     Are you a single parent with at least one minor child in your household? If so, then you are in good company. According to the U.S. Census Bureau, there are 12 million single parent households with minor children, up from 3.5 million in 1970. *
     Single parents of minor children must shoulder a great deal of responsibility, for themselves and their children. Oftentimes, single parents must go it alone emotionally, economically and legally. This article focuses on some of the fundamental legal challenges facing single parents, specifically when making plans for their own incapacity, for the care of their minor children and for any inheritance they leave behind.

Incapacity Issues

     Quick. If you are incapacitated, who will make your health care decisions? If your current health care legal documents were made prior to your divorce, then they likely appoint your ex-spouse as the end of life decision-maker. If this no longer reflects your wishes, then you need to revoke such documents by executing new ones that appoint family members or friends to serve in this important role.
     Have you considered your potential need for long-term care in the future? Without a spouse as caregiver, who would take care of you at home? Would you need to move to an assisted living facility or to a nursing home? Long-Term Care Insurance is a common method of funding this risk and some policies do double duty as Life Insurance. Seek expert advice in evaluating your options.

Minor Matters

     Your children are your most valuable assets. Absent proof of unfitness, a surviving parent remains the natural guardian of their minor children. What if your ex-spouse predeceases you? Have you made proper legal plans to appoint a successor guardian of your own selection? If not, then a successor guardian may be appointed to rear your children, either through the legal plans of your ex-spouse or by a court.

Inheritance Interests

     Who will handle the inheritance you leave your minor children? Unless you have made proper legal arrangements to appoint a custodian or trustee of your own selection, then your ex-spouse may be appointed by a court to manage the inheritance until your children reach the age of majority (i.e. age 18 in most states). Then, once your children reach the age of majority, the court will require your ex-spouse to distribute what is left directly to your children without any strings attached. Once in the hands of your children, the inheritance may create or attract problems.
     Few young adults are mature enough to manage an inheritance. If you wish to protect the inheritance for and from your children, then you may want to consider having the inheritance administered through testamentary trusts. These trusts can manage and distribute the inheritance according to your instructions. Additionally, Testamentary Trusts containing special spendthrift provisions may help protect the inheritance from the potential squandering, divorces, lawsuits and bankruptcies of your children.
     Should your children fail to outlive their inheritance, testamentary trusts may even provide for contingent beneficiaries. This can avoid unintended and unpleasant consequences. For example, in the absence of careful testamentary trust planning, your ex-spouse may become one of your heirs. Here's how.
     Suppose one of your children survives you and receives their inheritance outright. If that child then dies, without leaving a spouse or child, then their next-of-kin would be their surviving parent…your ex-spouse. To make matters worse, your ex-spouse's new spouse (and the new spouse's children) could enjoy the inheritance upon the death of your ex-spouse. Alternatively, properly prepared testamentary trusts can provide invaluable inheritance protection for your children and peace of mind for you.
     Another excellent method of unintentionally enriching your ex-spouse is the failure to review your beneficiary designations. While married, most spouses designate one another as the beneficiary of their respective life insurance policies and retirement plans. However, after your divorce, you should ensure that all beneficiary designations are updated. Otherwise, your ex-spouse may be entitled to receive the funds intended to benefit your children or other loved ones.

Summary

     Proper legal planning can protect your health, your children, and your wealth. A careful review of your estate plan is essential, especially if you are a single parent of minor children.

*Source: U.S. Census Bureau, Current Population Survey, March 2000.

Premarital Plans

     Are you planning to get married in the near future? Do you know someone who is planning to get married? Either way, this article addresses some of the important legal and financial consequences of exchanging vows. Let's review a few of the many consequences to consider before the big day.

Premarital Agreements

     Whether you are single, widowed or divorced, you might want to consider executing a Premarital Agreement with your intended before saying I do. Legally speaking, a Premarital Agreement is a two-party contract made in contemplation of marriage and is effective upon solemnization of the marriage. Practically speaking, it allows prospective spouses to lay their financial cards on the table and agree in advance to such things as:

• Asset ownership during the marriage;
• Asset disposition upon death;
• Asset division upon divorce; and
• Spousal support.

     To help ensure that your Premarital Agreement withstands future legal challenges to its terms, be sure to dot the i's and cross the t's. Here are some points to remember:

• Provide full, written disclosure of all assets by both parties;
• Provide adequate time for negotiation and reflection (i.e. well in advance of the wedding day);
• Make sure the Agreement is entered into voluntarily and the provisions are not unconscionable (e.g. unfair);
• Make sure each party understands the provisions; and
• Make sure each party has independent legal representation.

     While perhaps not very romantic, a properly drafted Premarital Agreement can protect family wealth and the interests of other family members in such wealth (e.g. family business ownership). In some circumstances, it also can help determine whether money is a primary motivating factor in the relationship before it is too late. Love may be blind, but you should approach marriage with both eyes wide open.

Yours, Mine & Ours

     Today, more American families are blended families, than traditional Nuclear Families. If your marriage would create a blended family, then careful estate planning is required to reach often-competing goals. For example, how will you provide for the financial needs of your surviving spouse during their lifetime and for your own children?
     Careful coordination between your financial planning and your estate planning is required to provide for your surviving spouse and your own children. One possible strategy could be called the triple play. Here's how it works: First, you and your spouse-to-be execute a Premarital Agreement identifying and separating your respective assets. This will allow each of you to retain control over their eventual post-mortem disposition. Second, you create a QTIP trust as part of your estate plan. Upon your death, this trust will provide at least its net income on the assets it holds for your surviving spouse. Upon their death, the assets are held and administered for your own children. Finally, a life insurance policy on your life will provide the funds needed to fuel the QTIP trust and/or trusts for your own children upon your death. Why life insurance? Because it provides a known sum of cash when it is needed at an unknown time in the future.

Final Thoughts

     Be sure to enjoy all of the romance and excitement of your upcoming wedding day. As part of your preparations, consult with qualified legal counsel to evaluate the financial, tax and family challenges created by your changing marital status.

Copyright © 2005 Integrity Marketing Solutions. All rights reserved. Some artwork provided under license agreement. This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.