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?
As with your own personal, health care, and financial decisions, would you rather select the guardians (i.e., backup parents) yourself or let a probate judge make the selection without your input? Only through proper estate planning for minor children 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 during estate planning for minor children:
When selecting a financial fiduciary to administer and distribute the inheritance, great care must be taken. Simply put, a fiduciary is a person or institution legally responsible for the financial affairs of another. Period.
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 they may rear your minor child or children to adulthood (i.e., age 18 in Kansas and Missouri), would you also want them to control the inheritance you leave behind? I didn’t think so.
As I see it, there are three basic options when it comes to financial fiduciaries, each with its unique advantages and disadvantages. We will call them Door #1, Door #2, and Door #3.
This 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. If Uncle Bob is the fiduciary for nephew Billy, their relationship is undoubtedly changed (hopefully not strained).
This option finds you appointing 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 Door #1.
I call this option the Pro-Am approach. You combine Door #1 and #2 for the best of both worlds. In short, the family appointee knows the strengths and weaknesses, has an “abominable no-man” to help preserve family relationships when Billy asks for a Ferrari and is not bogged down with investments, accounting, tax, and legal details. Instead, the professional fiduciary shoulders (and is rightfully compensated for) the day-to-day management of the inheritance, playing the heavy when necessary.
As you can see, selecting guardians and fiduciaries is essential for the physical and financial well-being of your children. Few decisions in life are more important. Only you can make these decisions through proper estate planning for minor children.
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