What Is the Purpose of a Guardian?

When you’re nearing retirement or enjoying your golden years, you need a will to distribute your worldly possessions and wealth accumulated during your lifetime. However, you also need a will when you’re in the parenting phase of life, according to a recent article “Why parents need a will to establish legal guardianship” from Wausau Pilot & Review. The future of your children depends upon your having a will and other legal documents in place.

As parents, you have the opportunity to name the person who will be your children’s guardian, in the event both parents die. Your will can also include information regarding who they should live with, who will be in charge of any funds they will inherit, and who will raise them. It’s not a pleasant thought, but without a will to name a guardian, children are at risk.

Naming the guardian can avoid your children being placed in temporary foster care until a judge decides who should raise them. Being with a trusted family member or friend during a catastrophic time in their lives would be far better than being cared for by people they don’t know, no matter how well-meaning they may be.

If one of the parents survives the other, the custody and care of the children generally remains with the surviving parent. However, if the children are under age 18 and both parents die, they need a legal guardian.

In most cases, the court will honor a deceased parent’s request for the person named in the will, unless it is determined this person may not be the best person to serve as guardian.

Parents can and do die at the same time, making proper estate planning and identifying a guardian very important to have in place.

The guardianship becomes legal with a court appointment after a court hearing, although laws and procedures do vary from state to state.

Be careful when choosing a guardian. Make sure that the person is ready and able to serve. There is no obligation for someone to accept the appointment, so evaluate your choice carefully. Like your estate plan, this is not a one-and-done appointment. It should be reviewed every few years, as your children grow and their needs change.

Consider these questions when figuring out who would be the best guardian:

  • Does the person share your belief system in education or religion?
  • Can the person raise your child until they reach legal age? Parents are often the first person we think of, but is a 68-year old grandparent with health issues capable of serving in this role, especially if the child is a toddler?
  • Does the person live nearby, or will your children need to change schools, lose friends and leave the family home?

Guardianship needs to be integrated into the rest of your estate plan. For instance, if you have a life insurance policy, is the designated beneficiary your child? A minor cannot inherit assets, but a trust can. Your estate plan may include a trust to own funds and a trustee to manage them. Will that person be the same as the guardian? There are as many good reasons to divide the roles as there are to keep them separate.

Your estate planning attorney can help you and your spouse work through the issues based on your unique situation. The peace of mind you’ll feel in knowing your children will be cared for if the worst happens is well worth the time and effort.

Reference: Wausau Pilot & Review (Oct. 23, 2022) “Why parents need a will to establish legal guardianship”

How Do I Talk to the Children about My Estate Planning?
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How Do I Talk to the Children about My Estate Planning?

Some $68 trillion will move between generations in the next two decades, reports U.S. News & World Report in the article “Discuss Your Estate Plan With Your Children.” Having this conversation with your adult children, especially if they are members of Generation X, could have a profound impact on the quality of your relationship and your legacy.

Staying on top of your estate plan and having candid discussions with your children will also have an impact on how much of your estate is consumed by estate taxes. The historically high federal exemptions are not going to last forever—even without any federal legislation, they sunset in 2025, which isn’t far away.

One of the purposes of your estate plan is to transfer money as you wish. What most people do is talk with an estate planning attorney to create an estate plan. They create trusts, naming their child as the trustee, or simple wills naming their child as the executor. Then, the parents drop the ball.

Talk with your children about the role of trustee and/or executor. Help them understand the responsibilities that these roles require and ask if they will be comfortable handling the decision making, as well as the money. Include the Power of Attorney role in your discussion.

What most parents refuse to discuss with their children is money, plain and simple. Children will be better equipped, if they know what financial institutions hold your accounts and are introduced to your estate planning attorney, CPA and financial advisor.

You might at some point forget about some investments, or the location of some accounts as you age. If your children have a working understanding of your finances, estate plan and your wishes, they will be able to get going and you will have spared them an estate scavenger hunt.

If possible, hold a family meeting with your advisors, so everyone is comfortable and up to speed.

Most adult children do not have the same experience with taxes as parents who have acquired wealth over their lifetimes. They may not understand the concepts of qualified and non-qualified accounts, step-up in cost basis, life insurance proceeds, or a probate asset versus a non-probate asset. It is critical that they understand how taxes impact estates and investments. By explaining things like tax-free distributions from a Roth IRA, for instance, you will increase the likelihood that your life savings aren’t battered by taxes.

Even if your adult children work in finance, do not assume they understand your investments, your tax-planning, or your estate. Even the smartest people make expensive mistakes, when handling family estates.

Having these discussions is another way to show your children that you care enough to set your own ego aside and are thinking about their future. It’s a way to connect not just about your money or your taxes, but about their futures. Knowing that you purchased a life insurance policy specifically to provide them with money for a home purchase, or to fund a grandchild’s college education, sends a clear message. Don’t miss the opportunity to share that with them, while you are living.

Reference: U.S. News & World Report (Feb. 17, 2021) “Discuss Your Estate Plan With Your Children”