Estate Planning for Minor Children

Perhaps people with the most urgent need for estate planning are those who have minor children:

Guardianship:  Do you realize that if you do not nominate guardians for your minor children, if something happens to you, the court will appoint a guardian for you?  There is no consideration made for the religion, morals, ethics or habits of the guardian chosen.  Moreover, relationships may be fractured, if not destroyed, when competing relatives or friends petition to become the guardian.

Things to Consider When Choosing a Guardian:

  • 1. Who best reflects your morals and values?  Most people first think of their closest blood relatives…but will those people truly raise your children in an environment that you would?  If you choose someone other than a relative, the estate plan can always provide instruction on visitation with family members and ways to ensure that your family is an integral part of your child’s life.
  • Age.  We often think of our parents as the first choice for guardian for our kids…but when your child is 16, sneaking out of the home, participating in several sports and after-school activities, will your 70 year old parent be able to keep up?
  • Geography.  If your children are older, and connected to their school, neighborhood, or church, it is good to consider options that will allow them some continuity in their life at a time when they are experiencing the worst loss and devastation that we hopefully ever have to endure.  If your guardians live out of state, consider giving them motivations to move here by allowing them to live in your home, rent free, while your children are being raised; or paying them a salary to ensure they are home with your kids when the kids are home…there are all kinds of alternatives and we have solutions to help you!
  • Don’t tell…but write explanations if necessary.  We think it is important that you ask the person you are considering as guardian if they would be willing to take the role – but don’t let them know they are your first or second choice.  This only unnecessarily hurts feelings…and most likely, you will live, and this guardianship is not needed!
  • Choose someone different than who you choose to manage the money.  You don’t want to give your money and your children to the same person…because there is simply too much room for unintentional abuse of the money.  We have seen situations where guardian/trustees “borrowed” the money; used it remodel the kitchen, or put in a new swimming pool – and when the child was ready to go to college, there was nothing left!
  • If you can, ask your kids…they have some excellent insights!

Distribution Management: Choosing the ages and stages at which your children or grandchildren will inherit is equally important.  Without prior planning, your children will inherit everything at age 18 (giving some pause for the saying, “If you give an 18 year old liquidity, they will drink it!”).  In contrast,  a well thought-out, customized plan that, for example,  gives your child distributions of 1/3 at age 25 or upon attaining a Bachelor’s degree, 1/2 of the remainder at age 30, and the balance at age 35, not only promotes maturity in matters of money, but gives your child opportunities to make mistakes and reflect on different ways to handle future distributions.  In addition, you can protect your child’s inheritance from creditors, from divorce, or from themselves, if necessary.

Prepare Your Guardian to Raise Your Children: A custom-tailored living trust allows you to specify how you want your children raised if you are not here to raise them.  For instance:

  • Do you want your guardian to move into your home in order to provide stability for your children?
  • Do you want your guardian to be home when your children are home?
  • Would you like trust funds to be available to your child to pay for grief counseling?
  • Do you want to spell out the family members that should be involved in your child’s life?
  • Do you have any instruction on how you want your children raised religiously?
  • Would you want your guardian to pay for a high school graduation trip, a wedding, a car, or a down payment on a home?
  • Would you like to condition distributions on your child reaching certain goals?