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Estate Planning for Parents of Minor Children

Life with young children is hectic, which is one reason why many parents do not have an estate plan. If you are the parent of a minor child, however, you need to plan for your child’s welfare in the event of your premature death.

Your estate plan must address two critical needs: (1) a guardian responsible for the care of your child; and (2) financial management of your child’s inheritance.

Nomination of a guardian

Selecting a guardian can be daunting, but once you commit to planning, the process is fairly logical. Consider the candidate’s age, health, stability, parenting style, the ages of his or her own children, and, most importantly, your child’s relationship with the candidate. When nominating a guardian for older children, you should involve them and consider their preference. Under Massachusetts law, a child who is 14 years old or older can object to the parent’s nomination or seek termination of the guardian’s appointment.

When naming a married couple as co-guardians, evaluate their suitability as guardians in the event of divorce, or should one of them die. The nomination provision in your Will should articulate these nuances. Keep in mind that if you are divorced the child’s other parent continues as guardian unless his or her parental rights have been terminated. You should name an alternate guardian in case the named guardian or guardians die before your child reaches adulthood.

Financial management of your child’s inheritance

A minor child cannot legally receive property outright, and in Massachusetts the guardian of a minor can receive only up to $5,000 of the child’s money per year.

One of the best ways to provide for your child is to establish a trust (a standby trust or a testamentary trust created under your Will) to be funded upon the death of one or both parents. The trust ensures that your estate (e.g., real estate, life insurance proceeds, and retirement accounts) will be held, invested, and distributed by a trusted fiduciary—the “trustee.”

Most people choose a family member to serve as trustee. You can also choose a professional or a corporate entity, or can have a family member serve with a professional or corporate entity as co-trustees. While the guardian could serve as trustee, you may want to separate the caregiver role from that of money management. Carefully weigh the options and discuss them with your attorney.

You will want the trustee to administer the trust in a way that reflects your values and priorities. So, a trust should state your priorities for the use of the trust assets. For example, you may authorize the trustee to pay for the remodeling of the guardian’s home to comfortably accommodate your child. You may also create incentives to motivate the child’s development, such as requiring your child to obtain a college degree or a full time job to receive discretionary distributions.

Life is unpredictable. Many parents assume that they or the child’s other parent will live past their child’s age of majority (18th birthday in Massachusetts), so they decide against planning. That is very risky and can have a profound negative impact on your child. On the other hand, if you die too soon and have left a thoughtful estate plan, your preparedness will protect your child and have a profound, lasting positive impact.