Single? Estate Planning Is Crucial

By Erin E. Arvedlund, The Philadelphia Inquirer

McClatchy-Tribune Information Services

Nov. 02--Single parents, listen up: A few pen strokes now can save you thousands of dollars later and leave your children more financially secure, too.

Estate and retirement planning is crucially important for single parents, both men and women. Many think their assets and retirement income will automatically pass directly to their children.

Not so. If you, the single parent, die early, without the right legal documents signed, a huge chunk of your assets can end up with an ex-spouse or with the government.

How, for example, will you divide bank and retirement accounts? Among both your children and your ex-spouse's children? If your will and financial documents don't specify, your kids might not get those assets, or the courts might decide for you.

Does each of your respective individual retirement accounts go to each of your respective children? What about the assets you accumulated with your ex-spouse? What about Social Security benefits, a percentage of which can legally belong to an ex-spouse?

Financial advisers say they see money divvied up unexpectedly all the time.

"Single parents have a unique set of financial issues, and they have less margin for error than other parents," says Lou DeLorenzo, with TIAA-CREF in Philadelphia.

"If something happens to you, your child may not have access to your assets until they are of age. Therefore, a will can ensure the passing of your financial assets takes place, and also who takes care of your child."

Build a spending plan, savings, health-insurance coverage, and a legal plan for the unexpected, DeLorenzo says. Single-parent family units "often have very different sources of income. Besides salary, there is alimony, child support, or even disability benefits" from state or federal governments.

Think ahead. Set up a trust, he adds. "The idea that a trust is for wealthy people is a myth. They are for everyone, and they provide control."

A current will, power of attorney, and health-care power of attorney are crucial. "Who will take care of the day-to-day paying of bills, the mortgage or rent, aside from taking care of [a] minor child? All that should be spelled out," DeLorenzo says. "If I'm single with an IRA, no one can access that to pay bills. There's no accessibility without a legal document."

Without a will, he says, a court-appointed guardian might be in charge of his boys. "It took my wife and I months to find the person to name as guardian of our children." They also set up a simple trust, into which proceeds of life insurance and other assets will go if they die.

"It's not about zeroes in the account, it's about documents in place."

Update paperwork. Did you know retirement or investment account beneficiary designations supersede wills?

With America's high divorce rate, it's common for an ex-spouse to inherit all the assets in an old 401(k) for which the beneficiary was never updated. And if paperwork is not in order -- which happens more commonly when women are not involved in the family's finances -- the probate process after death can be a financial nightmare, costing thousands of dollars in legal fees and months or even years before the assets are distributed.

Don't be afraid to discuss these issues openly. According to a survey by UBS, most parents, no matter how much or how little savings they have to pass on, don't want to discuss these issues with their children and heirs.

Get the help you need. You don't have to be a millionaire to do it. Angela Marchesani, program coordinator and counselor at the Women's Resource Center in Wayne, says the center holds "divorce resource" events at low cost.

"These are two-hour events where women can hear from a family law attorney and a divorce coach, who helps plan for the timeline and the emotional repercussions."

The center also has events on networking and job searches, and can refer newly single women to local bar associations, mortgage brokers, and financial planners. Five times a month, the center also offers legal consultations at different locations, and it refers clients to the financial-counseling organization Clarifi.

"They do budget and debt management and ongoing financial services," Marchesani says.

[email protected]

215-854-2808 @erinarvedlund

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