As any parent knows, the true joy at Christmas is the delight that comes from seeing your children’s happiness on their faces as they eagerly unwrap their Christmas gifts. People often take it for granted that they will always be around to share each Christmas and to be there for their children as they grow up. While that is usually the case, unfortunately it is not guaranteed. So, you may well ask who will be there to provide support, nurture, and instruct your children for the future if neither you nor your spouse is available. Most likely nobody else will do as good a job as you in raising them. But, who will step in, and what would happen to your young children? Wouldn’t you feel better knowing that you had a workable plan in place to provide for your children’s continued well being?
First, whom do you want to be responsible for raising your children? Hopefully a close and loving family member, like an uncle and aunt, would be appointed by the court as guardian. A court appointed guardian has parental custody and control over your child till they reach the age of majority, under the supervision of the court. What you need to know, is that you can tell the court whom you would prefer as guardian through a Nomination of Guardian document. In it, you can also instruct the guardian regarding a wide variety of personal lifestyle issues such as maintaining your children’s family relations, raising your children together (if possible), whether or not to permit their relocation out of the area, and if there should be any type of religious or spiritual instruction.
Next, the guardian will typically need your resources to assist with the additional costs related to raising your children (often in addition to their own). A children’s trust that keeps your assets in a single undivided trust can provide the guardian with such resources. This prevents your estate from being prematurely divided and distributed outright amongst your children who are not ready to receive it. Instead, the children’s trust keeps your assets together until your youngest child becomes an adult, at which time what remains in the trust is distributed amongst your children. (The trust assets can be sold as needed to provide cash, but the sale proceeds will be inside the trust.)
The trust’s primary purpose is to favor the dependent children over the older grown-up children. Furthermore, the trustee would have discretion to spend money unevenly amongst the children as needed. That is, in one year more money may go to one child than another because of necessity, such as schooling or healthcare. Moreover, the trustee would have discretion about how much to pay for the higher education of older (grown up) children to ensure that there is enough money remaining to provide for the younger children.
Perhaps the guardian will have their own children and may need to move everyone into a larger house. That will create financial pressure on your guardians’ family that cannot be ignored. Accordingly, the trustee may be authorized to benefit the guardian’s own children (such as paying the costs for beneficial extra curricula activities that will enrich their lives and create harmony). This will hopefully prevent them resenting your children and make them feel benefited (not just displaced) by the blended family situation. Harmony is worth a lot to your children’s happy co-existence in the new family arrangement.
Lastly, the trust will need cash. Typically life insurance is used to fund the trust with cash. So consult both an estate planning attorney and a financial planner. Having a plan in place will give you and your family the peace of mind that life will still go on for your children now and in the future, even without you.
Editor’s Note: Dennis A. Fordham is an attorney licensed to practice law in California and New York. He earned his BA at Columbia University, his JD at the State University of New York at Buffalo, and his LL.M in Taxation at New York University. He concentrates his practice in the areas of estateplanning and aspects of elder law. His office is at 55 1st Street, Lakeport, California. He can be reached bye-mail at firstname.lastname@example.org or by phone at 707-263-3235.
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