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Ask a Lawyer : Chapter 13 - Providing for the Kids
Making Sure the Children Are Well Provided For
Q. How can we assure that the guardians we’ve named for our children have the resources to raise them well?
A. If you have an estate plan that involves a living trust, the trustee will take the role of the property guardian. The trust will contain instructions for the financial well-being of the children. Just as parents can draft a memorandum to their guardians, they can also draft a memorandum to their trustee that goes beyond what has been stated in the trust.
A trust document can give the trustee authority to assist guardians of the children with the financial burdens associated with raising additional children. Such burdens may include the need to buy a bigger car or put an addition on a house.
Whether you have a will-based or trust-based plan, it is important that your documents enable your trustees/property guardians and personal guardians to act in the best interest of the children in manners consistent with the wishes, directions, and values of the parents.
Answer by Lena Barnett, Attorney at Law,Different Guardians for the Kids?
Q. Our two kids are not close to each other in age or emotionally. Can we specify different guardians for them?
A. Yes. One alternative that might bring them closer together is to specify that if one of them is of age when you die, that person should become the guardian of the younger sibling.
Answer by Pamela L. Rollins, Simpson Thacher &
When Can Kids Handle the Money
Q. In an UGMA or UTMA, the custodian manages the property for the benefit of the child, and state law determines at what age the custodianship has to end. What happens then? Does the beneficiary get the full amount of what’s in the account? What if I think the beneficiary is too immature to use the money wisely?
A. Your child will receive the full amount in the account when he or she reaches the age specified by state law. This is 18 in some states, 21 in others. If you are concerned about what your child might do with the account, you should consult an attorney before that time arrives. You may be able to persuade your child, on termination of the UGMA or UTMA account, to place the money into a trust that will continue for the child’s benefit until he or she is able to handle the funds. Another approach is the creation of a family partnership that you or your spouse can control. If the UGMA or UTMA account is placed into the partnership before it is required to be paid to your child, you would be able to continue to control the investment of the account and any distributions made to your child. Either approach would require the assistance of an attorney.
Answer by Harold Pskowski, BNA Tax Management,
Spend Down the Money?
Q. What are some other ways of keeping the money in the custodial account out of the hands of kids just barely above the age of majority?
A. The beneficiary is entitled to everything in the account at the age of majority, but a parent can spend down funds for the benefit of the child using funds to cover tuition, for example. Or the parent may want to consider establishing a restricted 529 Plan account by transferring the assets to the account. The funds will then be limited to educational purposes but they will not come under the full control of the beneficiary at majority.
Answer by Lena Barnett, Attorney at Law,
Conveying Values to the Next Generation
Q. Besides naming the best possible people to serve as guardians for our kids, what else can we do to assure that they will be raised with our values in mind?
A. While nominating guardians is important, parents should also consider drafting a memorandum to their guardians that express their hopes, dreams, and aspirations for their children. Such memoranda can cover personal beliefs, spiritual beliefs, educational preferences, views about what the children should be taught about money, and other values and routines that the parents may not want to express in their plan documents. Parents should review this document, like their other plan, documents on a regular basis.
Answer by Lena Barnett, Attorney at Law,