Retirement > 401(k)s & IRAs
Single parent savings plan
December 21, 2000: 11:06 a.m. ET

A doctor who is a single parent wants to protect his money for his kids
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NEW YORK (CNNfn) - Raising two young kids on your own is hard enough these days. You worry about their financial future, and what will happen to them if you're not around to care for them.

And if you're a physician, you might wonder about malpractice and how to protect your nest egg for your children.

In response to a reader's question, Frank Armstrong, a certified financial planner in Miami and president of Investor Solutions, Inc., said appoint a guardian and trustee to protect your children and their money. To avoid malpractice issues, you can buy insurance or take specific steps to become creditor-proof.

Ask the experts a question

As a single dad with custody of a five-year old and a three-year-old, and who is also a physician, how do I invest money for the future and protect it from malpractice exposure and protect it for my children in the event of my death? Their mother has a mental health problem and can not be trusted with control of my children's money. I live in Florida and am 39 years old. Any ideas?

You need to do some fundamental estate and asset protection planning with a professional. Ideally you could do both at the same time.

I don't know nearly enough about your situation, but here are some considerations:

Because your children are minors, and because of their mother's problems, you will want to appoint a guardian in your will. The guardian's function is to raise and care for them as you would if you were alive.

So, chose a person that shares your values, and has a relationship with your children. Of course, you should discuss this appointment with them in advance. Failure to appoint a guardian in your situation will almost certainly result in court action, and an outcome less than you might desire.

Click here to learn about some estate planning terms.

If you create a trust under your will, or fund an inter-vivos trust now, then a trustee can manage your assets for the benefit of your children until they are old enough to handle their own affairs. The trustee should have a good feel for money management, and need not be the same person as the guardian. However, they will work together to provide for your children.

Because minors are not allowed to own property or handle their own finances, failure to create a trust will cause funds to be supervised by the court for the benefit of the children under a guardianship arrangement. Guardianships are expensive and restrictive. Believe me, you don't want to go there.

Perhaps as bad, as soon as each child reaches the state age of majority, they get all the remaining funds. To put it kindly, this is often not a good thing for young people. Too much money too young with no guidance attached could be a disaster.

There are a number of steps that you might take to lessen the chance that a future creditor could get in your pocket. All of these steps have a cost attached to them, and involve loss of control.

Some physicians elect to carry malpractice insurance rather than go through all the legal steps to creditor-proof themselves. Others fund family limited partnerships or offshore trusts.

Some of the deciding factors should to be the amount of money involved, and the likelihood of a successful lawsuit sometime in the future that would exceed your coverage.

Notice I said future creditors. It's important to know that asset protection planning has little chance of success against current or past creditors. So, the time to plan is before a cause for claim arises.

Florida has very liberal debtor statutes. But, advanced planning with a professional is essential. For a primer on asset protection strategies, see my paper: "Asset Protection Planning: Keeping What You Have" which is available here.

It sounds like you have your hands full. Good luck.  graphic

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Investor Solutions, Inc.

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