Protecting children’s future requires tough decisions now
Protecting your childrens futureAs a parent, youre always thinking about whats best for your children. But have you thought about what might happen if youre no longer around? Its not a pleasant subject but it is important. Planning for your childrens future is even more important if youre not around to help. If you are a single parent this task becomes even more difficult. Single parents have a number of special estate planning concerns. At death, for example, there is no surviving spouse to take care of financial and personal family affairs. To help protect family and property, a single parent needs to establish an efficient estate plan during his or her life. Designating guardiansIf you havent already, make sure to have a will drafted by an attorney, in which you name one or more individuals to be the legal guardian of any minor child typically until the age of 18. A guardian will have to make decisions regarding the care and upbringing of the child. The person(s) named should be consulted b before the will is drafted to be sure they are willing to accept the responsibility. Since the designated guardian may become unable to serve, it is also a good idea to name one or two successor guardians. You may name a different person to be responsible for overseeing your childrens financial affairs. A single parent may be divorced and have legal custody of a minor child. At death, custody may automatically shift to the surviving parent regardless of what a will says. It is important to know that although divorce terminates a marriage, it may or may not affect a surviving parents custodial rights. You should consult your attorney regarding your particular circumstances.Establishing a trustWhile a child may be an adult in years, he or she may not yet be mature enough to handle, invest or manage property. You can establish a trust to protect the property you intend to pass on to children, no matter what their age. Trusts can protect assets for anyone you desire and may continue even until the death of the child and beyond. One of the most important decisions is who should be the trustee. The trustee (individual or professional) will manage the assets and make distributions based on instructions you provide in the trust document.A divorced parent who dies and is survived by minor children may not want the former spouse to have control over money left to the children. A trust can be created to control the funds left to children, even if the former spouse becomes the childrens guardian.Paying estate taxesUnder current tax law, the amount subject to estate tax decreases until 2010 when the tax is repealed. However, unless Congress extends current law, the estate tax is due to be reinstated in 2011. Because of this uncertainty, individuals with assets over $1 million should consult an attorney, tax adviser and financial adviser to create effective estate planning strategies.Gifts or bequests to a surviving spouse are generally exempt from federal estate taxes under the unlimited marital deduction. In addition, the income tax due on IRA and qualified plans distributions payable to a surviving spouse can be deferred by rolling them over to a surviving spouses IRA. Without a surviving spouse, the marital deduction is unavailable and both estate and income tax can be triggered. A single parent should consult an estate planning professional to discuss ways of reducing these taxes.Alimony paymentsSome single parents are dependent on former spouses for support. If the spouse providing the support dies, payments may end. The spouse receiving the support may consider purchasing life insurance on the life of the supporting spouse with his or her consent. Many divorce agreements stipulate the use of life insurance in this manner.Income protectionParents should consider a financial protection plan that includes life and disability Income insurance and determine how much capital or income is necessary to help protect children or other beneficiaries. For example, money may be needed to help maintain a home for children, pay for college or other expenses in the event of the bread winners death or disability. This financial protection may need to be coordinated with a will or trust.Living documentsAll parents should have an updated power of attorney, health care proxy and living will. Often, married couples will rely on each other to make decisions for them. This would be problematic if a tragedy were to occur to both parents simultaneously. Married couples and single parents may want to consider having a close friend or family member listed on these documents to make decisions for them if necessary.Although it is a difficult subject to face, you have options when it comes to protecting your children and your estate. The steps you take now can help ensure that your wishes are carried out the way that you desire.AXA Advisors, LLC, does not provide legal or tax advice. Please consult your tax or legal advisors regarding your individual situation. Jeffrey Apps & Tracy Tutag provide securities and investment advisory services through AXA Advisors, LLC (member NASD, SIPC) 1290 Avenue of the Americas, New York, NY 212-314-4600 and sell annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC and its subsidiaries. They can be reached at 926-6911 or firstname.lastname@example.org.