It is often a prudent idea for parents of minor children to create an estate plan. However, estate planning can be more complicated when there are minor children involved.
If you die unexpectedly, your children may need someone to make decisions for them in probate, may need someone to care for them and may need someone to manage any money they inherit. If their other parent is still alive, he or she can take on these responsibilities. However, if the other parent is determined to be unfit or if both parents die, other adults may need to fill these roles.
Select a guardian
Appointing a guardian should be one of your considerations when you create your estate plan. Your last will and testament allows you to name someone to care for your minor children if you pass away. This guardian could also act on your children’s behalf in probate.
If a guardian is not appointed in either parent’s will, the court may appoint a guardian ad litem to help your children make decisions in court. The court will also hold a hearing to appoint a guardian or guardians for your children. The best interests of your children will be considered when a guardian is appointed, but without noting your wishes in a will, your knowledge of your children's best interests will not be able to be considered.
When selecting a guardian, you should look for someone who:
- Is a trusted adult
- Lives close to you
- Would not struggle financially with the responsibility
- Would require few lifestyle adjustments
- You share values with
Set up a trust
Your children will not be able to manage their own inheritance until they come of age, so creating a trust may be another consideration as you create your estate plan. If you do not put your children’s inheritance in a trust, their guardian will be able to control the money. However, a guardian who may have great parenting skills, may not be also blessed with good financial sense. Although the guardian is only supposed to use the money to support your children, he or she could dwindle down the money before your children come of age. By putting your children’s inheritance in a trust, you can appoint a financially savvy adult to manage the children’s money until it gets distributed to them.
A trust also allows you more control over the circumstances in which your children will take control of their money. It is not always best for children to receive a lump sum inheritance on their 18th birthdays, since 18-year-olds rarely have much experience managing money. However, a trust allows you to set it up so that your children receive their inheritance in portions distributed at different times in their lives. For example, a child may receive one portion of the money on his 18th birthday, another portion on his 25th birthday and a third portion when he turns 30.
A parent’s thoughtful estate plan can help protect minor children in case their parents die unexpectedly. An estate plan can help children by naming a guardian to provide care and make probate decisions on their behalf. Additionally, an estate plan can help ensure any inheritance the children receive is used for their best interests.