This is the situation no one wants to even think about: both parents dying unexpectedly and young children being raised by someone else. But it does happen. That’s why having a will and naming a guardian is so important for anyone who has children: a will is the only place to name a guardian for your child. Usually the problem is deciding between someone who is really good with your kids and someone more experienced with handling money and investments. But there is another way, as explained by NJ 101.5 in “Choosing guardians for your minor children.”
Yes, you can appoint one person as a guardian of the child—this person will care for them—and designate another person as a guardian of the estate—this person will care for your child’s assets. Typically when minors are part of estate planning, the parents’ assets are put into trust until the minor reaches a specified age(s) when they can begin to take over some control as a trustee.
As an illustration, a trust can dictate that when the beneficiary reaches age 25, he or she can become a co-trustee with the guardian of the estate, but without the right to “remove and replace” (i.e. change) trustees. This simply means the guardian of the estate remains a trustee and, should they believe a given transaction is a misuse of trust funds, they can prevent the beneficiary from using trust assets. When he or she reaches age 35, they can retain the right to “remove and replace” trustees. At that point, the trust will be fully under their control, as they could replace any co-trustee with one more inclined to allow their type of spending.
The trustee will invest and distribute the funds at his or her discretion for the support, education, health, and welfare of the minor. If you go with two different people as named trustee and guardian, it gives them some oversight to ensure that neither one breaches his or her fiduciary duties. The bottom line? This means you can select the person best suited to care for your child to be their guardian and the person more suited to handle finances can be named as trustee.
In these types of cases where the trustee and guardian are not the same person, you’ll want to think about naming people who’ll be able to work together. They’ll need to talk about the child’s needs and the assets available in the trust fund. If you choose two people, the guardian won’t be spending beyond the trust’s ability to reimburse.
In addition, speak with your estate planning attorney about the value of holding a Family Care Meeting with your trustee and guardian. This provides you with an opportunity to explain your estate plan, how you wish funds to be used for your child, and can also be used to express any other wishes and details that you’d like them to know. This way, they are both aware not just of how you want the funds to be used, but what your estate plan is and what your wishes are for your children.
For more information about a Family Care Meeting, explore our website and contact us to schedule your consultation today!
Reference: NJ101.5 (October 24, 2016) “Choosing guardians for your minor children”