- If you are a parent with a minor child – I believe that is critically important that you do some basic estate planning to provide for your children if something should happen to you. Your family, and ultimately the Court, needs to know the answers to the following questions:
- Who do you want to take care of your children if you are gone?
- Who do you want to manage the assets from your estate and life insurance policies on behalf of you and your children?
- At what age do you want your children to have total access and control of their portion of their assets from your estate and life insurance policies?
Who do you want to raise your children if you are gone?
This is, perhaps, the most critical question that any parent might have to face – and we all know that making a clear, wise decision about who will raise your kids if you are unable to raise them yourself, can significantly shape their lives. Please, take time to pray about it, think about it, discuss it with your spouse, discuss it with potential guardians, discuss it with your attorney – and make sure that you feel peace about your decision. I can assure you that when you have settled on a thoughtful decision about who will be the guardian of your children – you will sleep much better at night.
Making this decision and incorporating it into your Estate Plan, will not only be a huge relief to you and your spouse, but it will also help keep your family from fighting over your kids. Moms, as much as your parents love (hopefully!) your husband, chances are they think they did a better job raising you than they think your in-laws did raising him! And the same is true of Dad’s parents too. This natural affinity that parents feel for their own child can be a comical topic at Christmas, but it can become a real problem if the issue is: who gets custody of the grandchildren? This all too often leads to a bitter custody fight in court. One basic truth that I have learned as a lawyer is this: in a custody fight, no one wins — and the children lose. More than likely the bad blood that occurs in a custody fight will linger and your children will never build a healthy relationship with the losing set of grandparents.
But a clear, thoughtful decision expressed in your Estate Plan by nominating a guardian of your children can help avoid these fights. We do this by not only nominating guardians in a clear, legal way, but also by explaining your decision to your family in your will or trust, so that you can minimize their hurt feelings and clearly express your love for them as well.
Who do you want to manage the assets from your estate and life insurance policies on behalf of your children?
If you have assets or life insurance policies and you do no Estate Planning, your children will still receive the assets from your estate. However, the assets won’t be overseen by your choice of a trusted Trustee, but rather, will be overseen by the Circuit Court. Every time that your children need a distribution from those funds, someone will have to petition the Court for the money. This can be costly and can cause needless delays in taking care of your children’s needs. A better solution is to create a springing trust and name a trusted friend or family member to be the Trustee to manage and oversee your child’s money until they reach an age that you feel like they are mature enough to handle the money well.
Moreover, by naming a Trustee in your Estate Planning Documents for your children’s money, not only have you protected them against delay, hassle and expense, but you have also reinforced your selection of guardian if you name the same person as guardian and trustee in your Estate Plan. This is strong evidence to the Courts that you have carefully planned for your children’s well being and that they should ratify your decision of who will care for your kids. Courts are very hesitant to name a different person as guardian than the trustee that you have appointed to be in charge of the financial well being of your children. Courts recognize that this sort of split arrangement can cause constant conflicts and messes in raising your children – a problem that they wish to avoid.
At what age do you want your children to have total access and control of their portion of their assets from your estate and life insurance policies?
If you have failed to provide for a trustee for your children’s finances and the Circuit Court is overseeing their estate, another significant problem can arise. The Circuit Court will lose jurisdiction over your children’s money and they will be entitled to receive the entire amount of their share of your estate when they turn 18. Because, in the eyes of the law, they are now adults. Think about that scenario. Very few parents think it would be wise to give a large, lump sum of money to their 18 year-old child. That is a recipe for financial disaster.
A client recently shared a story with me about a situation where a child lost his parents when he was 15 years old. The Courts oversaw the money from his parents’ estate until he was 18 at which time the Court lost jurisdiction. On his 18th birthday he received a check for $60,000.00, which represented the remainder of the money left in his parents’ estate. After depositing it in his checking account, he went directly to a Harley Davidson dealership and purchased a new $18,000.00 motorcycle. It was a beautiful machine. The kid had always wanted a motorcycle. He got on the bike, fired it up, revved the engine and put it gear. There was only one problem — he had absolutely no idea how to ride a motorcycle. Before he could get out of the parking lot of the dealership, he laid the bike down on the concrete and skidded into a metal fence. He was ok. The motorcycle was not. The mechanics at the dealership hauled the bike to their shop and repaired it. The repairs cost $9,000.00. When he finally took the repaired motorcycle off of the lot, his $60,000.00 inheritance was down to $33,000.00 and he was the proud owner of a repaired motorcycle that he still didn’t know how to ride.
This scenario did not need to happen. With proper estate planning, his parents could have established a trust that would have protected his inheritance until an age that they felt he could be responsible. In the mean time, they could have earmarked the money for his education. They could have appointed a trustee that they trusted to oversee his money until he reached the age that his parents established. His inheritance could have provided him a foundation for his future. Instead, it provided him with a wrecked motorcycle and some lost skin. With proper estate planning, this young man could have had his college education paid for and received the balance of his trust account at age 25 when he was mature enough to make a good decision with his money.
The moral of the story is simple: if you have assets or life insurance policies that name your children as beneficiaries, you absolutely need to do some basic estate planning in order to make sure that all of your assets are used to the maximum benefit of your children after you are gone.