Complete Estate Planning for Single Parents

Why Estate Planning is Crucial for Single Parents and Individuals

For Single Parents: Protecting Your Children’s Future

If you’re a single parent with sole custody, the basics of estate planning—like wills, trusts, and guardianship designations—are just as important for you as they are for two-parent families. However, there’s a critical difference: as your child’s only legal guardian, you cannot afford to delay.

Without a legally binding document outlining your wishes, if something unexpected happens to you before your child becomes an adult, your closest family and friends—your parents, siblings, or even your best friend—will not automatically gain legal custody. This means they also won’t have immediate access to your home or financial assets to care for your child, potentially leaving your child’s future uncertain and their well-being at risk. Taking action now ensures your child is protected, no matter what.

For Single Individuals Without Children: Securing Your Legacy and Future Care

The American demographic landscape has shifted considerably over the past four decades, with an estimated 45 million single individuals living alone in the U.S. today who do not have children. A significant portion of this group—60%, in fact—are aged 50 and above.

While facing the prospect of aging without the direct support of children or a partner can seem daunting, many single adults in their 50s find it to be an incredibly inspiring and empowering stage of life. If you’ve accumulated financial assets, planning who will inherit your estate can be a deeply rewarding experience, allowing you to define your legacy.

Furthermore, planning for your own future care and potential decline doesn’t have to be a negative experience. There are numerous ways for single adults over 50 to ensure they maintain their independence in healthcare decisions and living arrangements as they age. Estate planning offers you the peace of mind that your wishes will be honored, and your independence preserved, no matter what the future holds.

Note: the following content applies only to single adults without minor children.

Estate planning is necessary for everyone, not just married or partnered persons. An estate plan can include one (e.g. just a Will) or several components (e.g. Will + Living Trust + Advanced Directives etc.). We all need an estate plan because if we do not set out instructions as to who inherits what from us, the courts do so for us. In short, when you don’t have an estate plan, and die “intestate”, the law – not you – decides who inherits from you. What this means is that whatever assets you’ve accumulated during your lifetime get distributed by the courts according to a set of legal rules as set out in legislation and case law precedents. You essentially give up any say in how your assets (estate) is distributed, and to whom.

The most important estate planning instruments for single adults are:

• Living Trust (aka Revocable Living Trust)
• Advanced Directives

REVOCABLE LIVING TRUST- retain privacy & control (even after death)

Unlike a Will, when you have a Revocable Living Trust (RLT), your estate doesn’t have to go through probate. Probate is the legal process by which Wills are submitted to the courts for approval before the estate (assets) can be distributed. Probate is a matter of public record. Wills also expire once the Probate process is complete, and assets are distributed accordingly.

An RLT is a private arrangement. When you set up an RLT, you are the Grantor, but also the beneficiary of the assets that you grant to the Trust, and also the Trustee. The effect of this is that during your lifetime, you can move assets in and out of the trust, retaining full control over them. You give up being the title-holder (ownership) via the “funding” of the trust (i.e. moving title of the assets to the Trust from yourself). You can still use and benefit from these assets until you pass on. And even after you pass on, you can continue to keep the assets in the Trust, for them to be distributed at a later time (e.g. when the Trust continues to hold the assets for your minor children until they are adults). RLTs are a powerful estate planning tool. For adults without children, this is perhaps the most common and popular alternative to the Will (and for good reasons). (Note: if you are a single adult with minor children, you still need a Will as it’s the only legal document where your choice of legal guardians for your children is recognized by the law).

You can read more about Revocable Living Trusts here. Advanced Directives — You Retain your Independent Decision-Making if incapacitated.

I have clients who have not only aged gracefully, they have done so in both body and mind. Key to this is the peace of mind that they acquire when they have planned for incapacity. Incapacity takes place when you’re no longer able to make decisions for yourself as regards your medical care (e.g. if you have a stroke or are in a coma).

For a person living alone, the absence of clear expressions of what they want for themselves when they start to decline is all-important. Doctors and medical care providers or assisted living facilities and nursing homes are left to default to universally accepted standards of care — and such care may not be what you want (e.g. prolonging life artificially). And relatives (except for siblings) and friends do not – in the eyes of the law – have automatic decision-making powers, even if you’ve spoken with them about your wishes before. It is therefore imperative that you make your wishes clear as regards life-sustaining care in legally-recognized documentation. These documents include the following:

• Living Will and/or Health Care Proxy
• DNR
• Power of Attorney

You can read a detailed blog post on these crucial estate planning vehicles here.

The following are key issues I emphasize to my single-parent clients when they are planning for their wills and trusts:

“Legal Guardianship” of your minor children is the FIRST thing you should attend

If you have a close friend or relative you trust, start talking to them about legal guardianship of your children.

If you share joint legal custody with your children’s other parent, you need to get his/her agreement on guardianship arrangements and create a joint guardianship document that reflects your aligned decisions.

Pets – Don’t forget them

It may sound strange but if you and your children have a family pet, make sure your estate planning provides for the pet to remain with the children, and provide for that pet’s upkeep and care as well. Losing a parent can be a terribly painful experience, but one which children (who are often amazingly resilient) can manage better if they have their beloved pets with them. You can set up a pet trust to ensure that this is possible for your children, and this should be part of your estate planning process.

Money for Minors

Make a list of all your assets and keep it updated. If you have life insurance, that’s a major asset for your children, but bear in mind the death benefit is subject to estate tax (unless it’s in an ILIT – an irrevocable life insurance trust). It’s very easy to ensure that your kids get your life insurance – simply call your insurance carrier and make a beneficiary designation in their names.

You can also make beneficiary designations for your retirement accounts (e.g. the 401k you have with your employer or the IRA that is your own retirement account). You want to make sure, above all, that your kids have liquidity (cash) to live on while your Will goes through probate or when your Living Trust takes effect.

You’ll need to set up a UTMA (Uniform Transfers to Minors Act ) account as minor children aren’t legally permitted to manage their own money. A UTMA account requires a “custodian” — so pick an adult you trust and who has the financial acumen to manage the account prudently until your minor children are of age. In New York state, minor children who are beneficiaries under an UTMA account can only access the funds directly when they turn 21 years old. Your financial adviser can provide the proper UTMA-related forms to you as regards you life insurance and retirement accounts.

If you fail to designate a UTMA custodian, the courts will have to appoint a financial/property guardian for your children’s inheritance of these benefits, a time-consuming and costly process which will delay an adult accessing much-needed money quickly to pay for your children’s needs.

The other key legal structure to consider is an Asset Trust. Remember that your minor children can not legally handle or manage the financial assets you leave them. You’ll need to appoint someone to do so until they are of the age of majority. You can set up an Asset Trust and appoint a trustee. A Revocable Living Trust would be such a trust. But a trust document does not address questions of Legal Guardianship, which is best dealt with in a Will. If you have a Living Trust, you have to inform your financial adviser about it, especially if your directives under it differ from what’s in the UMTA documents pertaining to your life insurance and retirement account. For example, a Living Trust can dictate that your minor children do not have access to these monies until they are 25 years old (as opposed to 21 years old under UTMA).

Note: beneficiary payouts under life insurance and retirement accounts is a much more straightforward process and does not involve probate. It’s important, however, that you talk to your CPA or tax adviser about taxes on this type of inheritance as there are taxes levied in certain situations.

Real Estate – TALK TO YOUR TAX ADVISER, TOO

Some parents think that adding their children’s names to the title deed of the family home is a no-brainer. While the intent is good, the reality is that there are tax implications (e.g. capital gain taxes, gift taxes) when you do so. Please consult your tax adviser or CPA before you make any such move.

Be careful also about holding/owning property jointly with another person e.g. an ex-spouse or family member. Joint Tenancies are the legal term used to describe property held by two or more persons in equal measure with rights of survivorship. This means that when one owner (tenant) dies, the remaining owners receive the decedent’s share of the real estate. This right of survivorship operates by law, and overrides any Will or Living Trust.

Health – IT’S ABOUT YOU, BUT ALSO ABOUT THEM

Should you find yourself in a medical situation where health decisions have to be made for you, you can ensure that your wishes are respected and carried through by setting them forth in a living will or health directive. Those who care for you (including your children) would not have to experience the added stress that come with making such decisions for you or face legal hurdles to do so.