We would like to make a toast to all single moms (and single dads) for taking on the hardest job ever – raising children! A single parent shares the same hopes and worries about their child’s future as all parents do, but with less support and more sleepless nights. Like it or not, managing your finances and proper estate planning have now become the second biggest concern of your life. Every ounce of knowledge helps, so we have compiled these 7 crucial financial and estate planning tips to enrich you and your children with financial peace of mind.
1. Take Inventory of your Family Wealth
Living off one income is difficult, especially if you do not receive child support or alimony. The most important step for successful money management is to truly understand your expenses. A budget is simply a plan for how you spend your money each month. Start by making a list of your fixed expenses, such as rent, car payments, insurance, utilities, food, clothing, entertainment, etc. Then subtract that from your monthly income to make a basic budget. You can do this on a sheet of paper, an excel file, or get fancy with a budgeting software to help you easily plan a budget and track spending.
2. Have an Emergency Fund
It is good practice to set aside at least three months of living expenses so you are prepared for the unexpected. The “unexpected” means things such as loss of employment, car repair, health problems, kids’ extracurricular activities, etc. A hassle-free way to achieve this goal is to set aside a certain amount from each paycheck, ideally via automatic withdrawal from your paycheck directly into a separate savings account. When you don’t see it, you are less likely to miss it.
3. Educate Yourself on Guardianship Law
If a minor child, (under 18 years of age in Florida), experiences the loss of a parent, and is entitled to receive an inheritance, FL law governs how this inheritance will be managed until the child turns 18. This is through a court process called “guardianship.” Inheritance includes real estate, proceeds in a bank account, life insurance proceeds, stocks, CDs, cash in a safety deposit box/vault, or any other investments. When a child is set to inherit anything in excess of $15,000, a court must appoint a legal guardian to manage the minor child’s inheritance and to safeguard the minor’s interests. The process takes time, involves court expenses, and requires an attorney. All these fees usually come out of the inheritance. Note that although a parent is considered a “natural” guardian, only a court can appoint them as a “legal” guardian. A way around the guardianship process involves creating a Trust through an estate planning attorney.
4. Nominating Guardians for your Minor Children
If you have minor children (under 18 years of age in Florida), you need to appoint a guardian(s) who will care for them in case of your death. You can appoint a guardian either through your Will or in a document called a Declaration Naming Preneed Guardian for Minors. Having these crucial documents will 1) ensure your children live with who choose, rather than having a judge decide this and 2) reduce lawsuits that arise between family members over custody of the children. The guardian you choose can be a single individual or a couple. You can also choose primary guardians as well as backup guardians. Note that a guardian for your children can be a separate person as the guardian of property and money left behind for them.
5. Make Sure Children and Pets Stick Together
Make arrangements that if something were to happen to you, your children do not get separated from their pets. After the loss of a parent, a child relies on all things familiar, such as other family members, teachers, and pets. You want to ensure that the guardian that welcomes your children will also welcome your pets.
6. Financial Investments for You!
The day will come when you will stop working and enjoy your newly acquired free time. Although it is human nature to put off major projects while you have small children, that may lead to bigger money problems down the line. It is always a good idea to meet with a Financial Planner so you know your options regarding life insurance policies, college savings plans, UTMA accounts, and IRA accounts. There are such a variety of options out there, that almost any budget can allow for some long-term investment strategies that will benefit your children or their educational goals.
7. Meet with an Estate Planning Attorney
The best way to educate yourself on all the “what ifs” is to meet with an experienced estate planning attorney. Below is a common list of estate planning tools that will protect your children and their future inheritance:
- If you own a home – creating a “Living Trust” also known as a “Revocable Trust” is the best way to ensure the home will pass to your loved ones without the lengthy court-supervised probate process. Trusts are private documents used to by-pass probate, in which you get to name who inherits your home (or other real estate) and who will manage that property until your children become adults.
- If you have any investment accounts – make sure your minor children are not named as beneficiaries on these accounts, otherwise Florida Guardianship rules will apply.
- Durable Power of Attorney – A crucial legal document that functions while you are alive and allows you to select a person (the “agent”) to “step into your shoes” if you become mentally or physically incapacitated. The agent will be able to make legal and financial decisions and conduct transactions on your behalf. The Power of Attorney document ends when a person passes away. At which point, your Trust or Will should kick in to dictate the terms of how to distribute your estate. Note that if you created this document prior to October of 2011, it is time to update it as the laws have changed.
- Health Care Surrogate & Living Will – A Health Care Surrogate, also known as a Health Care Proxy, allows you to name someone (the “agent”) that will make health care decisions for you in case you are unable to make them yourself. Such decisions include consenting to certain medical procedures, seeking a second opinion, obtaining medical records, or transferring you to a different medical facility. If you don’t prepare a Health Care Surrogate document, and you fall ill and cannot make your own medical decisions, then Florida law determines who is responsible for your healthcare decisions. Note that if you are still legally married, this means your spouse!
Being a single parent is the most important job you will ever have. We understand the love you have for your children and will help protect your family as well as your peace of mind. Contact OC Estate & Elder Law at (954) 251-0332 or firstname.lastname@example.org to receive a personalized consultation regarding estate planning and all your financial options as a single parent.