Here at Graceful Aging Legal Services, we are passionate about helping parents name legal guardians for their children. It’s a critical step that allows parents to document the people they want and trust to raise their kids if they are incapacitated or unexpectedly pass away.
However, many parents just assume that the person who takes the children into their custody will also manage the children’s inheritance, but that isn’t always the case. In the most simple cases, estate planning for married couples is easy. You leave everything to your spouse, and the other parent will take care of the children.
However, as we all know, family life is rarely simple. What if you are single and there is no other parent to step in? What if your spouse is a “bonus” parent to your child? What if your child’s other parent has lots of love to give them but has trouble with their own finances? What if you and the other parent pass away at the same time? Taking care of your family through estate planning is about hoping for the best, but having a plan in case the worst happens.
What many people don’t realize is that you can’t just “leave money” to minor children. There has to be an adult who holds onto it for them until they turn 18. The person who is named as your child’s custodial guardian and financial guardian can be the same person, but they don’t have to be. If there is another parent involved, they are usually the default custodial guardian but if you are providing the money, you get a say- as long as you do it in advance of your incapacity or death.
If funds are left to a child outside of a trust, the Court will need to be involved in formally appointing a guardian for the child(ren)’s property. The guardian will be required to provide annual accountings to the Court, as well as purchase an insurance policy (known as a court bond) to secure the child’s property. If the parents have nominated a guardian, the Court will usually say a blessing upon that choice as long as it is in the child’s best interest.
In the case of a child who is 18 or older when a parent dies, they are able to receive their inheritance outright. While this might be less complicated than having a guardian appointed, it creates different issues. Think about the things you wanted to spend money on as a young adult? When did you truly become responsible with your money? What value did you place on money given to you versus money that you earned? If you’re concerned about any of that, you should consider raising the age at which your child gets their funds distributed if you do not want to take the risk that your child’s inheritance will be mismanaged, lost, or squandered on things like fast cars, clothes, and lavish trips.
Utilizing a living trust is the best way to put “speed bumps” and “checks and balances” around your children’s inheritance so that they do not receive a lump sum of money outright before they are mature enough to handle it. Again, you will be able to raise the age or lay out key milestones in which the child(ren) receive their money and specify a trustee who will again oversee the distribution of funds for your child(ren) according to your wishes for their future and how their inheritance is to be spent (i.e. on a college education, first house, wedding). While guardianships are overseen by the Court, trusts are handled within the family.
Luckily, all of this is easy to do if you work with a local qualified guardianship or create an estate plan attorney. In our office, we have a system that walks parents step-by-step through the decision-making process so that they are able to choose the best people to serve as their child’s property manager and/or legal guardian.
Our Nashville law firm is here to serve you. Schedule an appointment to talk with us so you can begin the process of legally documenting who will serve in these two very important roles in your children’s lives if the unthinkable happens.