Stay at Home Parents

Deciding to stay at home with your child is an exceptionally admirable choice, but it undoubtedly opens the stay-at-home-parent (SAHP) to certain financial and other vulnerabilities.  This article addresses some of the estate planning issues that should be considered by SAHPs.  These issues are especially important in light of unexpected events: the death of your spouse or a divorce.   While the advice in this article is directed to SAHPs, it is definitely applicable to all parents.  Consider the following:

1. Do You Have a will?

Executing a will can provide you with immense peace of mind.  In a will, you can nominate the person to handle your financial affairs after you die (called a Personal Representative), you can direct where you want your assets to go, and you can nominate a guardian (court-appointed, physical caretaker through age 18) for your minor child.

A will can also establish a testamentary trust for your child.  A testamentary trust is a way for you to have a trusted individual or company(called a Trustee) manage the money your child will inherit because of your death.    Your testamentary trust can give your Trustee guidance for financially supporting your child, and can indicate when you would like your child to be given control over the money.  An example of a popular form of testamentary trust “sprinkles” the distributions to your child by giving her a third of the money when she reaches age 22, another third at age 26, and the balance of the trust funds to your child at age 30.

A will is a vital document for new parents.  A will is also crucial to consider after a divorce.  The guardian nominations and testamentary trust provisions become exceptionally important for a single parent.  Moreover, divorce judgments often have specific requirements that need to be addressed in a will.

2. Do You Have an Advance Directive?

An advance directive is a document that appoints a health care representative (usually a trusted family member or friend) to make important medical decisions on your behalf if you are unable to communicate, including carrying out your wishes with regard to terminal illness and withdrawal of life support. Filling out an advance directive provides couples and friends with a reason to have the difficult, but necessary conversation about the types of medical interventions and life-prolonging treatments they want for end-of-life care.

3. Do You Have Life Insurance?

Do you have a life insurance policy that will attempt to compensate for the value of your work as a SAHP?  Does your spouse have a policy that will adequately compensate for the loss of her or his income?  Life insurance is one of the best and most responsible gifts you can give your family.

Life insurance is even more vital for a single parent, and is often a required component in a divorce judgment.  It is necessary to make sure your life insurance policy beneficiary designations correspond with your estate plan, especially if you have a testamentary trust in place for your child.

Life insurance, plus a carefully drafted will, can provide a significant measure of security for a spouse and child left to deal with the unexpected loss of a loved one.

4. What About All Your Online Accounts?

Do you, as the SAHP, pay the household bills?  If not, do you know the account numbers and log-in information, in case you need to start paying them tomorrow?  It is important for you to have access to this information, but it can also be helpful for your Personal Representative (named in your will) to have access to this information, as well.  Keep a current list of all your account numbers and passwords in a secure place (a safe-deposit box or fire-proof safe) with your original will.

You have probably purchased several parenting books with the arrival of your child, and will likely keep buying books at each developmental milestone.  Chances are, a significant portion of your books were purchased electronically.  What happens to those books when you die?  What happens to your iTunes account, your blog, your Facebook page?

These are tricky issues that lawyers, media companies, and lawmakers are currently sorting out.  In the meantime, I recommend that you leave your Personal Representative a list of all your online accounts and passwords.   Again, the list of passwords can be stored in a safe place with your will.  Along with the list of passwords, give your Personal Representative instructions about your digital assets.  The law may soon be settled so that you can bequeath your digital books, movies, and music.  For now, instruct your Personal Representative to provide your password information to the person who gets your e-book and music device.  Instruct your Personal Representative about what you want to have happen to your email account, your Facebook page, and your blog.  This will give your Personal Representative an idea about your wishes so she can work with the various online companies to honor those wishes.

In conclusion, there are many things a SAHP can do to minimize the risk and uncertainty of unexpected events.  By getting the necessary documents in order, you can focus your energy and time on parenting.  If you are a new parent or recently divorced, or just want to learn more about the issues discussed in this article, please consider contacting me for a free estate planning consultation.