How to Create an Estate Plan When You Have an Only Child
The notion of “only child syndrome” has been largely debunked. Recent research shows that only children generally develop social skills comparable to those with siblings. Outdated stereotypes about only children have evolved, especially as family sizes in the U.S. continue to shrink, making one-child households increasingly common.
While raising an only child may present unique challenges, especially in the context of estate planning, it also offers some simplifications. However, designating your only child as the sole beneficiary and decision-maker for all aspects of your estate plan may not always be the best approach. Factors such as the child’s age, personality, and lifestyle must be carefully considered, in addition to other important considerations.
The Changing American Family
In the past, large families were the norm. During the baby boom years (1946-1964), the average American family had 3.7 children. Today, the average is closer to 1.9 children. One-child households now make up about 20% of families in the U.S., and the number of parents choosing to have only one child has doubled over the past few decades.
Providing for Your Only Child in Your Estate Plan
Parents of only children are often in a stronger financial position to provide for them. A higher level of education often correlates with fewer children, and better-educated parents generally have higher incomes. Raising just one child can also allow parents to allocate more financial resources toward their upbringing. For instance, the average cost of raising a child in the U.S. from birth to age 18 was estimated to exceed $310,000 in 2022.
However, the financial responsibility doesn’t end when a child turns 18. A growing number of young adults (ages 18-29) continue to live with their parents, often relying on them for financial support.
Research indicates that most parents and their adult children report strong relationships, but a gap exists when it comes to expectations about inheritance. For example, a study by Northwestern Mutual found that a significant percentage of millennials and Gen Z expect to receive an inheritance, yet fewer Gen X and boomer parents have plans to leave one. This gap suggests differing perceptions about what is expected versus what will be received.
It’s important to recognize that there is no legal obligation to leave your child an inheritance. Even if your child no longer depends on you financially, you may have valid reasons for limiting their inheritance—or choosing not to leave them anything at all. Your estate plan is entirely your decision, and you are free to leave your assets to others, such as other family members, friends, or charitable organizations, should you choose.
If you do wish to leave something to your child but are concerned about their ability to manage it, a trust can be an excellent solution. You can set up a trust with conditions or milestones (such as completing education or achieving financial independence) that trigger distributions. Alternatively, you could appoint a trustee to oversee the assets for your child's benefit.
Your Only Child’s Role in Your Estate Plan
An essential part of any estate plan is choosing decision-makers who will act on your behalf in the event of incapacity or after your death. You may be thinking of assigning your only child to some or all of the following roles:
- Personal Representative/Executor: This person is responsible for managing your affairs after your death, including distributing assets, paying debts, and filing tax returns. If you have a will, this person will be named in it; if not, the court will appoint one.
- Successor Trustee: This is the person responsible for managing and distributing assets in a revocable living trust. If you have a trust, your successor trustee will carry out your instructions after you pass away.
- Agent under a Power of Attorney: A power of attorney allows you to designate someone to handle your financial or medical affairs in the event that you become incapacitated. This individual may be given broad legal authority to make decisions on your behalf.
Each of these roles involves significant responsibility. While it may seem logical to appoint your only child to all of these roles, it’s important to consider whether they are up to the task. Ask yourself:
- Does your child have the necessary skills to manage these responsibilities?
- Do you trust them to handle your financial and healthcare decisions in the way you would want them made?
- Can they make difficult decisions under pressure and deal with potential conflicts with creditors or beneficiaries?
- Are they able to manage these obligations given their own personal and professional commitments?
Remember, you are not obligated to name your child as a decision-maker. If you have concerns about their ability to handle these responsibilities, you may want to consider appointing a close friend, family member, or even a professional trustee or executor.
By dividing responsibilities among several individuals, you can ensure checks and balances, reducing the risk of one person having too much control or making decisions that might conflict with your intentions.
Balancing Practicality and Emotion in Your Estate Plan
Estate planning is not just a financial exercise; it’s an emotional one as well. As a parent, it’s natural to want to ensure your child is provided for, but that doesn’t always mean leaving them everything or giving them all the decision-making power. The balance between head (practical concerns) and heart (emotional desires) can be difficult to strike, and this balance may change as your child grows older and their needs evolve.
For guidance in creating an estate plan that works for you, your child, and others you care about, it’s advisable to consult with one of our estate planning attorneys here at Alperin Law. We can help you navigate the complexities of planning for the future and making decisions that align with your personal and financial goals.