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                There are common events which trigger a need for estate planning, one of which is the birth of a child.  In my experience, nominating a guardian for the care of a minor child is often the most important yet challenging decision for parents to make.   Below are some important issues which should be addressed in every estate plan which includes provisions for the care of a minor child.

Nominating a Guardian.  Unfortunately, many parents put off making this important decision because it can be so difficult.  Or, in the alternative, they have made this decision yet have failed to formally nominate that person in a Will or Living Trust.  Formal nomination is important because the court relies on these documents to appoint the Guardian in case of the death of the parent (See previous blog post titled “Important Guardianship Information” for more information about this process).    Things to consider when nominating a guardian include; whether the guardian shares the same values, where the guardian lives, how old the guardian is, whether the guardian is married and/or has children of their own, and most importantly, whether that person is willing to take on the responsibility. 

Leaving Instructions for the Guardian.    Once a guardian has been nominated, parents often forget to leave specific instructions for the guardian about how they would like their child to be cared for.  These instructions maybe oral or written but should address the following issues; what type of lifestyle they would like their child to have, specific goals for the child, core values that should be emphasized, etc. 

Nominating a Trustee.  A guardian is the primary caregiver for the child.  However, a trustee is the person responsible for managing and distributing assets for the benefit of the child.  These two positions are distinct yet can be performed by the same person.  There are situations in which they should not be the same person.   The following are some examples.  The guardian may not be the most qualified money manager.  A trustee who is not the guardian could prevent overreaching by the guardian.  Also, managing assets can be an additional burden and responsibility that could be placed upon someone else.   I advise clients to nominate those individuals who are going to be best suited for each position, whether it is as caregiver or money manager.    

Coordinating the financial assets with the legal instrument.     Once the documents have been established, it is imperative that the financial assets are properly coordinated so that the trustee or guardian will be able to control the assets on behalf of the child in case the parent dies.  This is generally best accomplished through a living trust.  The most crucial step is titling assets in the name of the trust and naming the trust as the beneficiary of funds from retirement plans and life insurance policies.   This ensures that court action is not required to transfer the funds into the control of the trustee.  It also ensures that the instructions within the trust will control how the funds will be utilized and distributed.  For those individuals who chose to use a Will as their primary estate planning document, it is also possible to have a trust created from the Will.  I generally do not recommend this approach because it requires court (Probate) action however, the testamentary trust created by the Will can be named as the beneficiary of life insurance policies and retirement plans.

For more information about our estate planning services, visit http://www.familywealthlawgroup.com/planning.html

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