Parents often cite a child’s birth as one of the happiest days of their life. The child will bring many moments of happiness to your lives and undoubtedly a few trying moments, too. However, as parents, you also need to consider who would care for your child if you no longer can. Estate planning can offer some valuable assistance.
A simple will executed by each parent is a common method used to protect minor children. A will is the only legal avenue (without court intervention) where parents can nominate a legal guardian for children under 18.
So, who should you nominate as a guardian? Beyond recommending someone you trust and respect, here are some other factors to consider:
- Guardian’s Location—Will a guardian’s location require a change of schools for your children; will the location allow your children to remain close to existing friends and family?
- Guardian’s Values—Does the guardian share your core beliefs, a similar philosophy in raising children, religious views, etc.?
- Guardian’s Suitability—If a guardian has children of their own, could they care for your children too; does the child already have a good relationship with the prospective guardian?
Once a guardian is chosen, the next question is how financial assets should be held to best benefit your children. A testamentary trust, formed in a parent’s will, is a great tool to hold such assets.
This type of trust secures assets left for your children and can specify an age or ages for asset distribution. Many parents distribute a percentage of a child’s share every few years, minimizing potential excessive spending of an inheritance at one time. Without a testamentary trust, all assets are distributed when the child is no longer a minor. To oversee this trust, you may nominate the above-named guardian, a financial institution, or an entirely different person/entity.
Protections for younger children are absolutely vital. Whether that means completion of a simple will or other estate planning options, this issue deserves consideration by you and your family.