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Planning for Minor Children

Serving Clients in the Five Boroughs and New Jersey

Do you have a minor child(ren)? If so, then they are your most valuable treasure(s). So, what arrangements have you made for their care should something happen to you and their other parent?

As with your own personal, health care and financial decisions, wouldn’t you rather select the person(s) who will raise your child(ren) in your absence, or let a probate judge decide without your input? Proper Planning will allow you to avoid this difficult and impersonal situation.

There are two critical choices commonly faced by parents of minor children. First, who will the primary caregiver of my minor children in my absence, and, second, who will manage their inheritance, funds or assets?

If you are separated, divorced or never married to the surviving biological parent of your shared minor children, then that surviving parent will continue to be their guardian, unless the court finds that they are unfit to do so. Nevertheless, you will want to make prudent alternate choices regarding their guardianship should the situation arise or the surviving parent does not want the responsibility.

While every family situation is different, here are some practical things to consider when selecting guardians for your minor child(ren) and which will avoid conflict or differing approaches to your child’s care:

  • Select guardians who share your values and life priorities; and already have an established positive relationship with your minor child(ren).  Often grandparents fit this  role, but age and health should be considered, especially if the minors are very young;
  • When selecting a married family member, consider selecting the family member only, not the couple, in case your family member predeceases or they divorce their current spouse;
  • Make sure your legal plans provide for the compensation of the guardians, or at least that the inheritance is available to them to cover all legitimate expenses incurred when rearing your minor child(ren); and
  • Obtain permission of the selected guardians before appointing them in your legal documents.

Great care must be taken when selecting a financial fiduciary to administer and distribute your child(ren) inheritance or trust funds. A fiduciary is a person or institution legally responsible for the financial affairs of another. Fiduciaries are held to the highest standards of care and loyalty in performing this role.

So, who will manage any inheritance left upon your death? What if you and the other biological parent are divorced or were never married? Even though he or she may rear your minor child(ren) to adulthood, would you also want them to control the inheritance you leave behind, too? Or would you prefer a person you choose to administer and distribute your money for the benefit of your child(ren) until they are old enough to manage it on their own. You might want to set a certain age or condition.

There are three options when it comes to selecting financial fiduciaries, each with its own advantages and disadvantages.

The first, and most common option, is appointing a trusted family member(s) or friend(s)in this position. One of the positives of this is that they likely know the needs and strengths of your dependent child(ren), plus, as interested parties with a personal relationship with you and your children may not charge the full commission set by law or will waive these fees. On the other hand, they may be busy with and distracted by their own life and financial responsibilities. This role puts them in the difficult position to set limits on a young person’s spending, in order to preserve it for education or future housing. Your appointed financial guardian or trustee also may have to say no to the surviving caretaker parent as well. This role may require delicacy and skill.

The second option is you can appoint a professional fiduciary, such as an institution (e.g., a trust company) or an individual (e.g., your CPA). The positives and negatives are the opposite of the first option, in that they may not know your child(ren) well or be familiar with their individual needs. They may be impersonal in their approach to their decision.  But, as professionals, they will give the financial management their full attention.

A third option is combining the first two options for the best of both worlds. In short, the family/friend appointee(s) knows the strengths and weakness, will tell your minor child(ren) no when they ask for a Ferrari, but will not be bogged down with investments, accounting, tax and legal details. Instead, the professional fiduciary shoulders (and is rightfully compensated for) the day-to-day management of the inheritance and can pressed into service to explain the financial reason for withholding trust distributions.

As you can see, selecting guardians and fiduciaries is essential for the physical and financial well-being of your surviving minor children. Few decisions in life are more important. Only you can make these decisions through proper advanced planning.

What to Consider When Planning for Minor Children:

  • Discussion of trust for minor(s) and the appropriate age to terminate the trust
  • Educational funding
  • Special needs planning for children with disabilities
  • Deciding where and with whom your children should live
  • Arranging to pay for their support and maintenance

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