Parenting is hard. But when a single parent is raising a child, or when separated or divorced parents are raising a child, often, decisions about the child’s upbringing are harder or amplified. This rings true especially when it comes to estate planning because if one parent or the only parent dies, then deciding custody over the child as well as the financial aspects of their well-being is tantamount. Here are top three things single and separated/divorced parents should consider when deciding on their estate plan.
Just like in the case of divorce, deciding where a minor child would live if one of the parents died, is a court proceeding. This means that the court will consider what is in the best interest of the child and will name a guardian over the child. This guardianship lasts until the child is 18. There is a strong presumption, that if the other natural parent is alive, that the child should be placed in that parent’s care. If you want to give the court guidance as to what you think is in your child’s best interest, then you can designate your choice for guardian in your Will. To make your wishes legally binding, they must be contained in a validly signed Will.
Guardianship will always be a matter for the court to decide, but who controls the money for the benefit of your child, is completely up to you. Therefore, even if the natural parent has custody over your child, this does not mean that they have to have control over the assets you leave behind for your child. It’s your assets and you can decide what happens to them when you are not here. Deciding what happens to your assets is done via a trust. Either a trust that is part of your will (Testamentary Trust) or a separate trust that is revocable.
Life Insurance payouts are controlled by the beneficiary designation you fill out when you obtain your policy. Even if you have a trust set up as part of your will or a separate trust, those provisions will not control what happens to the life insurance policy. To make your life insurance work with your estate plan, your beneficiary should be your estate if your plan includes a Testamentary Trust or your Trust if your plan includes a Revocable Trust. A minor child should never be the beneficiary of life insurance. If a minor is the beneficiary of your life insurance, those proceeds typically cannot be used for their upbringing, but also cannot be used by the minor. In situations where the minor is the beneficiary of life insurance, there is a lot of court involvement, fees, and your child gets a huge payout at 18 – the opposite of what was intended.
At Satterfield Legal, our goal is to give peace of mind to you. We help guide you in making the most delicate and complex decisions – those surrounding the well-being of your children. The first step is to contact us and start the process of getting your wishes in order and legally enforceable.