My thoughts on guardianship, wills and trusts — The Bump
3rd Trimester

My thoughts on guardianship, wills and trusts

mamamedeiros1mamamedeiros1
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edited December 2014 in 3rd Trimester
I read a post in another thread about the tough discussion of death and planning for what happens to our children and each other when we pass away.  The whole conversation got nasty and the original topic got lost.  I posted this reply, but am afraid that no one will see it because the thread deteriorated. I feel really strongly that it's a topic that all parents should be discussing.  Sorry if I'm too forward by just sharing my opinion about this, but I thought perhaps y'all could use some info.  I'm not an estate planning attorney, and you should always consult a professional for these matters.  Here is the info that I'd like to share with you, as a lay-person, and a first time mom:

A living will may not be sufficient, but it is a start.  If you die without a will, the state that you live in has a will for you. It is administered by the probate courts of your state. It is set up to determine the flow of your assets.  Some of your assets (including any retirement accounts and life insurance or annuity contracts with a specific beneficiary) will not be controlled by a will or by the probate courts. If you have your own will, the probate courts will use it to determine what your wishes are regarding your assets and, most importantly, what you'd like to have happen to your children if you've included your selection for legal guardian.  A will is contestable, which means that people can argue against it in court.  It is a very public process, and your debtors (or people who claim to be your debtors) can come out of the woodwork and demand payment for debts outstanding.  If you are truly concerned about being sure that your assets are distributed per specific instructions, and you'd like the affair to be as private as possible, I'd recommend a simple trust.  

A trust is a legal entity that you create to take ownership of your assets.  It is administered out of probate courts and out of the public eye.  If you, for instance, have a life insurance policy and want your children to be the beneficiaries of those policies, remember that if you pass away before they turn 18, insurance companies are REQUIRED to hold the money in a cash account for them until they reach the age of majority. This means that the money cannot be accessed, FOR ANY REASON, to help raise them.  Your best bet, if you don't have a trust, is to name their adult guardian  as your beneficiary, so that they may access the funds to help raise your children in your absence.  This does pose the problem: there is no oversight as to how the money is spent.  They could blow it and put your kids in the basement.  More likely, they may not know how to properly manage their new found money and it may end up getting used for things you may not want.  If you only have a small amount of assets, this may not be a big deal. Money spends fast. If you've only got a small life insurance policy, a will and a trustworthy guardian should be sufficient to be sure that your assets go as far as they can towards helping with your kids.  

HOWEVER, if you're smart (like I know all you mommies are) and you and your partner are heavily insured (now that you've got at least 18 years of financial responsibility for another human being or two) like I know you are, it's a great idea to call an attorney (or use your free legal benefit from your employer) and set up a basic trust.  In it, you determine not only who raises your children, but separately (if you like) who manages your money, how much they get and when they get it.  You can determine exactly how your money is spent to be sure that your children are provided for according to your wishes.  It's got oversight and is incontestable.  Meaning: no one can argue against it.

 We've decided to have my brother and SIL raise our child if we both get hit by an asteroid.  But my parents will be the trustees of the trust, and will manage the money that will go towards raising our child/(ren).  This means that my brothers family will be provided for per our wishes, but he won't have access to all the money at one time, reducing the risk of misappropriation of funds.  I know this answer is long, and not entirely what you asked, but I thought that perhaps a little more knowledge about the process might make it easier for you all to have the conversations with your partners and family members.  I know death is difficult to talk about, but if you do it right, you only have to have the conversation once.  Then it's done, and you can stop worrying about it. 
kaylaalexxanderfostersstudio

Re: My thoughts on guardianship, wills and trusts

  • good point.  thank you. 
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  • If you, for instance, have a life insurance policy and want your children to be the beneficiaries of those policies, remember that if you pass away before they turn 18, insurance companies are REQUIRED to hold the money in a cash account for them until they reach the age of majority. This means that the money cannot be accessed, FOR ANY REASON, to help raise them.  Your best bet, if you don't have a trust, is to name their adult guardian  as your beneficiary, so that they may access the funds to help raise your children in your absence.  This does pose the problem: there is no oversight as to how the money is spent.  They could blow it and put your kids in the basement.  More likely, they may not know how to properly manage their new found money and it may end up getting used for things you may not want. 
    The bold is incorrect. Insurance companies typically require a conservatorship (or guardianship of estate) for accounts left to minors. A conservatorship functions in much the same manner as a trust, and (at least in my state) with greater oversight than a trust will operate, and the assets can be used for support of the child.

    I don't recommend naming a guardian as the outright beneficiary of the funds intended for the support of the children.

    Trusts can be contested, just like wills. Creditors can make claims against trusts, just as they can make claims in probate administration. In my experience will/trust contests are rare and creditor claims are easy to resolve.

    Estate planning is a great idea, but one of the things that surprises me is how many people do it when their kids are young and then don't update their plans for 20+ years. It's really not a "do it once and never again" type of deal.
    [Deleted User]PrimRoseMamajennypolkadots
  • We are in the process of fiding an attorney, so I will be getting accurate information soon, but Im still curious as to the free legal benefit through employer she spoke of. Anyone know? I had never heard of this.
    Some employers offer pre-paid legal services as a benefit of employment. Attorneys have to agree to receive referrals from the plan and there are limits on both fees and type of matters covered under the plan.
    [Deleted User]
  • Thank you for pointing out the errors that I made.  I know that I am not an attorney and was just sharing the knowledge that I've gained so far.  I realize that there may be errors and inaccuracies in the info I provided.  As always, please consult a professional.  I did not mention the tax rules because life insurance is typically a tax free benefit and I wasn't meaning to imply that I was a know-it-all about estate planning.  It's very complex.  Also, not all insurance companies will require conservatorship for an account for a minor.  I was trying to point out the worst case scenarios so that people could be aware of some of the ramifications of their decisions.  I just thought that a little info would at least start folks on their journeys towards planning.  I know it's not a one-and-done process, and didn't mean to imply that it never needed to be addressed again.  As for the free legal services that some employers provide, I know that not all do. It is typically something that you can pay for on a biweekly basis out of your paycheck (i think mine costs $6 biweekly) and comes with some free services like a basic trust. 

    I was only trying to be helpful and share info, in the spirit of community.  I'm 8 months pregnant and I've been looking at this website since we've been trying to conceive, for several years.  I know it isn't the end all be all for information about pregnancy.  I came here for some support and to learn about other people's stories.  It is very disheartening how it appears that there are a handful of members that have claimed the website as their own and are very unsupportive of those of us that are new and trying to make connections.  I know there are some asshats on here, and ridiculous things get posted. I didn't intend to offend or piss anyone off.  I know that pregnancy is full of unsolicited advice already. Sometimes, for some people, it is the wrong information.  I care about my fellow people and wanted to help share what I knew.  I've been in the insurance and financial services industries for many years.  I know that I've still got a lot to learn, but a little information is sometimes better than a sharp stick in the eye.     

    If these boards and forums aren't friendly places for people to share ideas and come to ask questions and not be judged, what are they for?  If you don't like the topic, can't you just skip over it, like you do dinner table conversation that you don't like or a movie on netflix that looks stupid?  

    cosmama
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