IF YOU HAVE MINOR CHILDREN, HOW SHOULD THEIR FINANCIAL AFFAIRS BE HANDLED IN THE EVENT OF YOUR EARLY DEMISE?
If you have minor children, it is important to execute a Will in which you name a guardian to care for your children if you should die before they are 18 years old. In addition, if you are leaving assets to assist in paying for your children’s expenses, you may wish to consider nominating either a conservator who differs from the guardian to oversee those assets or leaving those assets in a trust to be overseen by a trustee for the benefit of your children.
Should You Name a Conservator of the Assets you wish to leave to a child?
If you leave only minimal assets to a minor child, the court may not require appointment of a conservator. Institutions or government agencies, however, that pay benefits to, or hold assets for, a minor may nevertheless require appointment of a conservator. If the assets are more substantial, the court will require appointment of a conservator. The conservator may be the guardian or a third party, but if you don’t nominate the conservator in your Will, then the court may chose someone you would not have chosen.
As to whether the guardian and conservator should be the same person, consider the potential conflict of interest if the guardian is also the conservator. Under Idaho law, a guardian is not legally obligated to provide from his or her own funds for the minor and the money he or she does receive must be applied to the minor’s current needs for support, care and education. However, there are often grey areas. For example, the guardian may seek to use the minor’s inheritance to build an addition on the guardian’s house or the guardian may desire an expensive new vehicle - all of which are arguably needed for the minor’s current support and care. While a court will review the guardian’s use of money, it may be more or less lenient than you would want the court to be in granting such requests. By appointing a separate conservator, you add an additional level of evaluation. However, as discussed below, merely appointing a person, without providing guidance to that person, may still not accomplish what you want.
Should The Child’s Assets Be Held In A Trust?
Even if a conservator is appointed, the minor’s assets will be distributed outright to the child when he or she reaches the age of 18. One can imagine the problems that can arise if an 18 year old suddenly has access to what seems like a lot of money. If a trust held the assets instead, they can be managed and distributed by the trustee in accordance with the deceased parent’s plans for longer than the first 18 years of a child’s life. Such plans might include: (i) holding the assets in the trust:
• for a child until he or she reaches a certain age or accomplishes certain goals,
• until the youngest child of the deceased parent(s) is a certain age, or
• forever if the child is vulnerable to creditors, scams, drugs, etc.
The trust agreement can give direction to the trustee as to when and how to use the assets to incentivize the beneficiary to accomplish certain objectives such as educational and/or vocational training, eliminating drug or alcohol dependence, etc.
Additionally, if a conservator is nominated in a Will, the court may not approve the person nominated and the conservatorship proceeding may be expensive, even more so if there is a conservatorship contest with other family members. If the minor’s inheritance is, instead, placed in a trust and a trustee is appointed, no court proceeding is required and the court does not have the power to disapprove the trustee - though the trustee could later be removed for breach of fiduciary duty.
Give Direction to Your Guardian, Conservator and/or Trustee
Simply appointing a guardian, nominating a conservator, and/or appointing a trustee may be insufficient if you do not provide direction as to how you want your children raised and what your priorities are (such as education, religious upbringing, training in athletic or musical areas, etc.). An appointed guardian or nominated conservator would probably welcome your insights about the child’s strengths and weaknesses, as well as your goals as to how you would like your money to be used. We recommend that you provide guidance in your Will or Trusts as to the key principles that should guide both an appointed guardian and recommended conservator in their decisions.
Even though estate planning seems simple, it is not. By working with an experienced estate planning attorney, it is more likely that, in the unfortunate event of your death, your children will be provided for in a manner you want.
Mathieu, Ranum & Allaire, PLLC is a boutique law firm with offices in Boise and Sun Valley, Idaho focusing exclusively in the areas of estate and trust planning, probate and trust administration, asset protection, business law and charitable organization laws. We represent individuals, families, trustees, heirs and beneficiaries, entrepreneurs and closely held businesses, tax-exempt organizations, and family offices, as well as professionals and business owners potentially exposed to future creditor claims.
NOTICE: The foregoing is NOT legal advice. We have prepared these materials to inform and educate. They are not, and should not be considered, legal opinions or advice to anyone, nor do they create an attorney client relationship by your reading them. These materials may not reflect the most current legal developments in the applicable area of law. Furthermore, this information should in no way be taken as an indication of future results.
© Mathieu, Ranum & Allaire, PLLC. 2014