The Best Gift You Can Give Your Kids as a Single Parent is an Estate Plan

Whether single, widowed, or divorced, establishing an estate plan is arguably the best gift one can offer their children. This critical plan safeguards their financial independence, enabling them to manage their assets according to their wishes after they pass away.

This article outlines what single parents know about giving the best gift their children will ever receive from them—an estate plan.

Why singles, widows, and divorcees need an estate plan

Single parents often have unique circumstances: never married, a divorcee, or a spouse who has lost their partner. Regardless of one's status, estate planning is a pressing need. As a single parent, children are dependent on one's resources. In the unfortunate event of untimely death, the absence of an estate plan could leave children in financial uncertainty.

Estate planning for single parents is not just about distributing assets; it also designates who will be the guardians of their children if they are underage when their parent dies. It's essential to award the children's custody to someone who aligns with their parenting values and can provide for them.

Estate planning essentials

Will— At the core of an estate plan is a will, which delineates how one's assets are distributed to heirs at death. It is a legal document that explicitly states one's wishes regarding the distribution of their assets and the guardianship of their children.

Living will—A living will states one's preferences for end-of-life care. It provides guidance to healthcare proxies and medical professionals regarding care and wishes related to life-prolonging treatments.

Durable Power of Attorney (DPOA)— This legal document grants a trusted individual the authority to manage one's financial affairs in the event of incapacity.

Health Care Proxy—Also known as a Health Care Power of Attorney, this document appoints someone to make medical decisions on behalf of an individual in the event they become unable to do so.

Revocable living trust—A revocable living trust, also known as an inter vivos trust, transfers assets into a trust during one's lifetime. Upon death, these assets transfer to a secondary trust, such as one established to care for a single parent's kids or designated beneficiaries, without going through the probate process.

Trust—A trust is another vital component that, after death, outlines the conditions for how and when one's assets will be distributed. By establishing a trust, single parents can provide for their children at different stages of their lives, such as during college or when they start a family.

Letter of intent— A letter of intent communicates what an individual would like to happen after their death or incapacitation. It can detail funeral arrangements or provide information for the person managing their affairs.

Important documents—An organized list of necessary documents (such as birth certificates, deeds, and insurance policies) and their locations can significantly assist loved ones in managing an individual's affairs after their death.

Limited Liability Company (LLC)—In some instances, establishing an LLC as a business structure can help protect an individual's assets in the event of legal issues and offer tax advantages.

Estate plan: A roadmap for managing assets after death

An estate plan should encompass all assets, including one's home, cars, investments, and personal items. Homes and vehicles typically make up a significant portion of an individual's wealth, and utilizing a trust can help maintain ownership of these assets for financial reasons, benefiting the children.

Stocks and other investment assets are also crucial. They can serve as a source of income for the children, providing them with financial independence in the future.

Lastly, personal items, such as jewelry, artwork, and heirlooms, hold sentimental value and should be included in your plan. Deciding who inherits these can help avoid potential disputes among family members.

In conclusion, as a single parent, your role is both demanding and rewarding. By establishing a detailed estate plan, you can give your children the greatest gift of all: a confident future. Financial and legal professionals are knowledgeable in helping single parents design an effective, comprehensive estate plan that will help protect your children's interests when you are no longer around to do so.