Many parents believe that naming a legal guardian will resolve any issues surrounding the care for minor children in the event of tragedy.
However, leaving assets to minor children takes a lot more than simply naming someone to raise them.
Neither “named guardians” nor court appointed “property guardians” are automatically granted access to the inheritance in order to raise the minor beneficiary. In fact, guardians have limited authority to decide how a minor’s inheritance should be managed. Without additional asset management, a probate court may need to get involved.
In the probate process, all decisions made by the legal guardian must be approved by the court. Every expense must be documented, audited, and approved by the court. Going through this process is time consuming, and it can carve away at the value of the inheritance to pay for court costs and attorney fees.
Another issue to consider when leaving assets to minor children is what will happen when the child reaches the age of 18. Many parents worry about their child’s ability to responsibly manage finances at that age. Without additional estate planning, the court will distribute the entire inheritance in a lump sum once the child reaches adulthood.
One solution to these problems is to set up a trust in the minor beneficiary’s name.
A trust avoids the uncertainties that guardianships create because it names someone to manage the inheritance, also known as the trustee. A trust helps to avoid probate because decisions do not have to go through the court. Trusts also mitigate the concerns over the child mismanaging an inheritance because parents can better control when and how much their children or grandchildren receive the funds.
There are many different types of trusts. Each has many different ways to avoid probate and manage inheritances. These issues are best undertaken by an experienced estate planning attorney who can help parents decide what works best for their family and what meets their needs.
For more information, please contact Gordon Fronk at Hollis, Cronan & Fronk, P.A.