Children’s Issues in Estate Planning

Below is a brief bullet point summary of some issues to consider when planning for your minor children:

1.            If you have minor children, the hardest question is who should raise your children in case of death?  In other words, who should be named as guardian of your children?

2.            In conjunction with item 1 above, who will take care of the money for your children?  Who will be Trustee of your child’s trust?

3.            In making a decision about who should raise your children and who should be trustee, there is a school of thought that the guardian and the trustee should be different so each will keep an eye on the other.  However, I believe if you need to worry about such a situation, you named the wrong people.

4.            There are times where I think it makes sense to name different people as guardian and trustee. Specifically, where the person you name as guardian is perfect to raise your child, but does not have a clue about money or investments.  Thus, in that case, it makes sense to name different people.

5.            Do not name your minor children as beneficiary of life insurance, retirement accounts or any  other assets that pass by beneficiary designation.  Those accounts will not be distributed until the court gets involved, which means it will be more expensive and the proceeds managed with court involvement.  More importantly, the account will be distributed to them, at the latest, by 25 years of age, which may not be in their best interest.  Therefore, it is better to do your own plan that provides a trust for your children. This allows you to determine the terms of the trust rather than state law and the court, including the ability to defer distributions until your child is older or to make distributions in stages.  There are many other options available when you draft a trust for your children.

6.            I am not a licensed insurance agent; however, life insurance is an important asset to protect your family.  If one parent dies, life insurance on the life of that parent is important to provide security to the family, reduce stress on the surviving parent, and give the surviving parent options on how to deal with the unexpected loss of their spouse.

7.            One final thought – I strongly recommend to my clients that they do what I refer to as a “Letter of Desires.”  You may do more than one:

  1. One to the guardian(s) – let them know about items you want them to consider when raising your children.
  2. One to the trustee – let them know how to use the investments, what  you want them to consider.  Many times people are much more conservative when they are responsible for other people’s money.  Let them know it is okay to make distributions for extraordinary events, i.e., graduation, marriage and births.  Also, it is okay to make distributions for unusual items like a walking tour in Europe!

These are examples, however, you can do more.  This letter needs to be in your own handwriting and each parent should write their own letter.  The reason for the letter to be handwritten is, I believe, it makes it harder to ignore.  You are speaking to that person when they read your handwritten letter. 

This article does not attempt to address all issues or concerns, but merely to make you aware of things to consider when planning for your family.

Disclaimer:

This information does not constitute the rendering of legal, accounting or other professional services by Pete Benenati or Benenati Law Firm, PC.  This information is not intended to create or provide an attorney-client relationship.  Although care is taken to present the material accurately, any implied or actual warranties as to any materials herein are hereby disclaimed along with any liability with respect thereto.