This is the #1 question parents ask us as California estate planning attorneys. And there are many estate planning tools that can be used to ensure your children’s futures are secure and more.
It is most common for parents to be concerned about (1) who is going to physically care for their minor kids (children who are not yet 18years old); and (2) who is going to manage the finances parents leave behind for their kids.
A Guardianship Nomination generally allows parents to nominate who they want to have physical and legal custody and care over their children. And it allows parents to detail their wishes on where they want their children to live and how they want them to be raised.
Once a Guardianship Nomination exists, it can eliminate any potential fights that may arise among competing friends/family members regarding who should take care of the kids. In the event that the nominated Guardian needs to step in after a parent passes, they will still need to seek court approval by filing a guardianship petition. California Courts place great weight on the parents’ nomination when looking at who to appoint as a guardian.
A guardian can be appointed for the person (a child’s physical care) or estate (a child’s financial care) or both. The guardian of the person will make healthcare decisions and have legal custody over your kids .The guardian of the estate will have the ability to manage your child’s finances – if no Children’s Trust has been created or the kids inherit/receive money from sources outside of their parents’ Trust.
A parent will often say if they die, they want everything to go to their spouse, and after their spouse dies then everything to their kids. However, all kids mature at different rates and often, kids continue to learn and make mistakes well into their 30s. And everyone would probably agree that giving a 15-year-old young adult thousands or even millions of dollars outright without any supervision is a bad idea.
Parents can create a Sub-trust within their own Trust, called the Children’s Trust. The Children’s Trust holds funds until the parent’s kids “come of age”. Parents get to determine what that “age” is and can even distribute in multiple chunks rather than all at once.
A Trustee of the Children’s Trust is appointed to manage the Trust, invest funds if necessary, and can distribute funds as needed to help care and provide for the kids until they come of age.
Parents who really want to guide their kids even after they’re gone can also add “carrot” provisions.
For example: $1,000 for 5,000 hours of community service. $20,000 after graduating from a 4-year university. Receipt of money in chunk distributions only after proof of annual family reunion to Trustee. Etc.
The sky is the limit in creating a Children’s Trust. Although people often think of estate planning as uncomfortable, it’s essential to have a plan in place. If not for yourself, then certainly for your children.
For blended or young families, an A/B Trust is also a helpful tool. An A/B Trust essentially states that when the first spouse dies, the Trust gets split into two parts: the Surviving’s Spouse’s Trust and the Deceased Spouse’s Trust.
The Surviving Spouse has access to the assets designated to their Survivor’s Trust and can make changes to beneficiaries and Trustees of their Survivor’s Trust. However, they cannot edit the Deceased Spouse’s Trust. Language can be included in the Deceased Spouse’s Trust stating that the Survivor cannot use/access money in the Deceased Spouse’s Trust or that the Survivor can only use/access money in the Deceased Spouse’s Trust after using up all their money in the Survivor’s Trust.
This can protect money and assets designated to the Deceased Spouse’s Trust for the benefit of any kids who are listed as beneficiaries of the Deceased Spouse’s Trust. Essentially, this allows you to set aside separate trusts for funds and assets for a spouse and for kids to ensure care for both. No one can determine what the future will hold. So, ensuring that money is set aside for your kids, no matter what happens, can be a great relief.
An A/B Trust, Children’s Trust, and Guardianship Nomination are just a few of the many ways that you can protect and plan for your kids and ensure they have a great future! If you have questions or need to get started on setting up an estate plan, contact Bellator Law Group to set up a free consult here or check out other helpful articles like When to do an Estate Plan?.