What would happen to your kids if you did not make it home tonight?
Parents can make a plan today for that “what if” by designating a guardian, conservator and if appropriate, creating a trust. What are each of these tools?
Guardian Designation
A guardian designation specifies who you want to take care of your kids if you become unable. A guardian is the physical caretaker of your children. Your guardian designation can also include powers of attorneys to enable someone to make medical decisions for you child should you also be living but for some reason unable to make these decisions on their behalf. For example, if your family was all in the same accident, it would be useful to have someone designated to make health decisions for your children.
Without a guardian designation, a court will choose someone to take care of your children. It is likely that you have someone in mind so making this designation more formal is incredibly important so that it is followed.
Conservator Designation
If you plan to leave your children any life insurance proceeds or other funds in the event of your death, you must specify who will take care of their finances. If you don’t, a judge will appoint someone for you and although you might prefer otherwise, your child will receive any assets outright at the age of 18. The Conservator you designate will take care of your child’s money until your child turns 18. Is an 18 year old going to be wise with their money? Do you want to require your child to use any life insurance proceeds in an a responsible way such as:
- for educational expenses?
- toward a down payment on a first home?
- something else?
If so, a Family Trust can be useful.
Family Trust
A family trust is not just for rich people. I repeat, trusts are not only for wealthy people! For children and for parents, trusts are incredibly useful. A trust can specify how money must be used. A trust can also designate what age a child can receive their money outright with no rules. The person who oversees this is called the Trustee. You, the parent in your Estate Plan can pick the Trustee.
Many people say for example, my Trustee should use any money that might be part of the trust (like life insurance) for my child’s general benefit and needs until they turn 18 or graduate from high school. After that, my child can have money from the trust for college as long as they are being responsible and passing their classes. Once they graduate from college, they can receive whatever is left. Or, once they graduate or reach the age of 25, whichever comes first, they can receive whatever is left. If these more detailed requirements are something you would like, consider a family trust. (Note, that you can make the trustee use the trust funds in any way you want, these are just examples.)
Although it is a difficult topic to think about, planning for the day that tomorrow starts without you will save your family and your children so much hardship. Give us a call or fill out the form below if we can help with these decisions. Consultations are free and we work on a flat fee to make it affordable for you.