It is no fun at all to contemplate your own death, but there is even less fun in considering who might care for your minor children should you pass on early. The reality is that anyone with young children should have a Last Will & Testament and that Will should contain provisions to appoint a legal guardian to care for your children. This is no less important if you are married, and your spouse is a co-parent to your children.
We recently met with clients who instinctively knew that their Will should name both someone to care for the minor children as guardians but also manage funds left for the benefit of those children. Our clients half-jokingly called these roles the “kid takers” and the “money takers,” and those playful terms are actually quite an accurate description. The legal terms for these two important roles are “legal guardian” and “trustee.”
If both parents die leaving young children, then a guardian is appointed to care for the children until the child reaches majority age. A Will is the perfect document to establish the selection of the guardian. Our preference is that only one guardian is chosen to serve at one time, but that successive or alternate guardians are selected in the event the first guardian cannot or will not serve.
Parents also may decide whether the guardian should be compensated for caring for the children, and the Will, again, is the place to make and record that decision.
Many estate plans for young parents include a Testamentary Trust, which is a trust that springs to life on the death of the parents. Assuming both parents have passed away, any monies dedicated to fund the trust would then be available for the trustee to use for the children. The trust also describes circumstances when larger sums of money could be distributed to the children. For example, the trust may call for a $3,000 distribution in the event a child graduates from high school, or a $10,000 distribution in the event the child later decides to buy a home (as an adult, of course). The trust will eventually make final distributions and terminate normally when the child reaches a certain adult age, also designated by the trust.
Parents also may decide whether the trustee should be compensated for serving as the trustee. Parents may empower the trustee to withhold distributions, in the event the child engages in bad behavior. For example, the trustee may withhold distributions if the child suffers from drug addiction or has significant debts and creditors seeking the child’s assets. Again, the Will is the place to make and record the decision to grant these powers to the trustee.
Of course, this article does not address every issue that should be discussed by a lawyer and his clients before creating a Will with these provisions. This article is merely an overview and introduction to these topics, and you should seek a knowledgeable estate planning attorney before drafting your Will or Testamentary Trust.