Estate Planning for Minor Children
Serving Families and Individuals throughout Prince George’s, Montgomery, Howard, and Anne Arundel Counties
Are you the parent of minor children? If yes, then they are your most valuable treasure. So, what arrangements have you made for their care should something happen to you and their other parent? Do you have an estate plan in place that will protect your minor children if something happened to you and your spouse?
As with your own personal, health care and financial decisions, would you rather select the guardians (i.e., back-up parents) yourself, or let a probate judge make the selection without your input? Only through proper legal planning can you select the guardians.
There are two critical choices commonly faced by parents of minor children. First, who will take care of my minor children, if orphaned, and, second, who will manage their inheritance?
If you are separated, divorced or never married to the surviving biological parent of your shared minor children, then that parent will continue to be their guardian, absent a court-proven case of unfitness. Nevertheless, you will want to make prudent choices regarding guardianship should your minor children be orphaned.
While every family situation is unique, here are some general practical pointers to consider when selecting guardians for your minor children:
- Select guardians who share your faith, values and life priorities; and already have an established positive relationship with your minor children;
- Make sure your legal plans provide for the compensation of the guardians, or at least that the inheritance is available to cover all legitimate expenses incurred when rearing your minor children; and
- Obtain permission of the selected guardians before appointing them in your legal instruments. That is only meet and right.
- Prepare documents to address the guardianship of children if you are disabled, and not only if you die.
- Do the math when selecting guardians, and make sure that they selected people with be able to carry through with care to age 18.
- Have a chain of command, as the person or people you name may not be able to serve when the time comes.
Great care must be taken when selecting a financial fiduciary to administer and distribute the inheritance. Simply put, a fiduciary is a person or institution legally responsible for the financial affairs of another. Fiduciaries are held to the highest standards of care and loyalty in this role.
So, who will manage any inheritance left upon your death? What if you and the other biological parent are divorced or were never married? Even though he or she may rear your minor child or children to adulthood, would you also want them to control the inheritance you leave behind, too?
There are several basic options when it comes to financial fiduciaries, each with its unique advantages and disadvantages.
Option 1 is the most common option. Here, you appoint trusted family members or friends. On the upside, they likely know the strengths and weaknesses of your loved ones, plus they may not charge much, if anything, to oversee the inheritance. On the downside, they may be busy with and distracted by their own life and financial responsibilities. Also, they may find it difficult to say “no” to an irresponsible heir.
Option 2 finds you appointed a professional fiduciary, such as an institution (e.g., a trust company) or an individual (e.g., your CPA). Interestingly, the upsides and downsides are the opposite of Option 1.
Should the Guardian handle the money? The roles can be combined but don’t need to be: some people are great with kids, but not so good with money. These are options to discuss at a consultation.
As you can see, selecting guardians and fiduciaries is essential for the physical and financial well-being of your minor children. Few decisions in life are more important. Only you can make these decisions through proper estate planning.