SECURE YOUR CHILD'S FUTURE: ESTATE PLANNING FOR SINGLE PARENTS
If you have a minor child that depends on you, you need an estate plan. Who will care for your child if you're unable to? And how will your child be financially supported?
An estate plan allows you to address these concerns surrounding your child's care and custody. You can also provide instructions about how your money and property should be used for their benefit.
Addressing Childcare and Custody in Your Estate Plan
Creating an estate plan allows you to name someone to care for your minor child if you're unable. In Ohio, a child under the age of 18 cannot legally care for themselves (unless they have been emancipated). A guardian must be appointed to take care of the minor child if both parents have passed away or are unable to care for the child. If you don't choose a guardian yourself, a judge will appoint one for you according to state law. This person may not be the person you would have chosen.
How do I nominate a guardian for my child?
There are a few different ways to nominate a guardian to care for your child after your death. First, it can be done in a last will and testament. It can also be done in a pour-over will. It's important to note the difference between these two documents.
A last will and testament is the central document of many estate plans. In this document, you name a guardian for your minor children. You also outline how you want your assets distributed when you die, and appoint an executor to handle those duties.
A pour-over will works in conjunction with a trust. It's used to transfer any assets that were not put into the trust during your lifetime. In other words, the will "pours" any remaining assets into the trust after your death. It's often used as a safety net to ensure that any assets that weren't properly transferred to the trust during your lifetime are still managed and distributed to your liking.
What happens if I'm out of state and an emergency happens?
Ohio has a document called a childcare power of attorney. Many families choose to use this document to give a trusted family member or friend the powers of a legal guardian for a limited time. For example, if you're going on vacation without your child, you may want to give the adult watching them childcare power of attorney. This way, if any emergency were to happen, that person could authorize medical care for your child, etc.
Leaving Your Child an Inheritance
If you pass away without an estate plan, the other legal parent may be in charge of managing the money and property you leave to your child. If there's no other legal parent fit to do so, then the court will appoint someone.
An estate plan allows you to make your wishes known. You can name the person that you want to manage your child's finances.
When and how will my child receive their inheritance?
Without an estate plan, your child's inheritance will be given to them outright when they turn 18. Although they will be a legal adult, they may not be prepared for such a large influx of assets. You may want to provide some restrictions on what the money should be used for.
With a trust, you can leave instructions for exactly how you want the inheritance to be used. A properly drafted and funded revocable trust can be managed without probate, and no documents need to be made public.
There are many options available to you when crafting instructions for how your child’s inheritance should be managed and distributed. Most of our clients choose to make multiple, spaced-out, distributions. For example, the child receives 50% of the trust at 20 years old, 25% at 30 years old, and the remainder at 35 years old.
You can also structure your child’s trust as an incentive trust. This allows the trustee to give your child money only after they meet certain goals. For example, graduating from college or being sober for a year.
Or, you can leave the decision of how, and when, to give out the funds completely up to the trustee’s discretion. This is sometimes referred to as a discretionary trust. Discretionary trusts often come with benefits such as protection from creditors and divorcing spouses. Because your child will not be guaranteed a specific amount of money or property, the funds will be better protected.
When deciding to use a discretionary trust, it's important to choose your trustee wisely. Talk to an estate planning attorney and be sure to provide clear guidelines for the trustee to follow. Many of our clients choose a trusted family member to act as the trustee. If you don't have a family member able to fill this role, you can look to close friends that are already a part of your child's life. If you don't have someone to serve as trustee, you may want to consider hiring a professional trustee. Be aware that these professionals charge fees for their services.
Setting Up an Estate Plan to Protect Your Minor Child
Without an estate plan, state law decides who will care for your child when you pass away, and how their inheritance will be managed. You have the power to design an estate plan that is unique to your child’s circumstances and allows you to choose the most trusted individuals to guide them.
We would love the opportunity to help you create the best plan for your family. Call us at 614-389-9711 to schedule an appointment.
Want to know how all these estate planning documents work together? Download our Consumer's Guide to Estate Planning in Ohio here.