In our previous blog post we discussed how having a Will protects your wishes for your children. We discussed the first two roles, those of Executor and Guardian.  The third role is Trustee.

Role 3:  Trustee of Children’s Trust(s):

Without a Will, when a minor becomes entitled to an inheritance, and Financial Guardian will be appointed by the court to manage the funds until the child turns 18. A parent, guardian, or other responsible person would have to apply to the Court and ask to be appointed as the Financial Guardian, regardless of the fact that they are already the child’s legal guardian.  Court applications take time and money. In your Will, you can name the person who you would like to manage your children’s funds (as well as set an age higher than 18 for the distribution). Your appointed trustee will have discretion to pay out funds for after-school activities, university, living expenses, etc. (and you can further customize their powers if you so choose). These standards are sometimes referred to as HEMS: Health, Education, Maintenance, and Support.

Depending on circumstances, you can appoint the same person for all three roles, or you may choose to have a different person appointed to each role. You should consider your values (financial and otherwise) and relationships, as well as their suitability for each role. You should also weigh your preference for convenience (1 for all 3 roles) vs. protecting your estate (3 for the separate roles). For example, if the guardian is the same person as the trustee of the children’s trust, and they need funds to cover an expense for the child, they can immediately pay the funds to themselves. Depending on your circumstances, you may choose that convenience.  On the other hand,  your children’s inheritance is better protected if the guardian had to request the funds from a different person, to ensure the use is proper. You may value that extra layer of security.

To better illustrate the distinct roles, here are some hypothetical scenarios:

(1) Sarah and Chuck are a couple making their Wills together. They have a close relationship with their friend, John. John handled his parents’ estates and did a great job. John is also a great uncle, and already very close with Sarah and Chuck’s kids. In both their Wills, they decide to appoint John to handle their estate as Alternate Executor, to act as guardian to their children (if they are both deceased), and to manage the trust funds for their children (i.e., John would handle all three roles).

(2) Same situation as before, but Chuck has decided that if he dies after Sarah, he would rather have his own sister, Ellie, handle his estate. Chuck still agrees that the kids should be raised by John, and he trusts John to manage the children’s money. Chuck appoints Ellie as his Executor (after Sarah), and he appoints John as the alternate guardian and as trustee of the children’s trust.

(3) Ellie is divorced from her ex-husband Devon and they both maintained guardianship rights. Ellie knows that Devon is a good father and is in favor of him becoming the sole guardian of the children if she passes away. But she would not want Devon to have access to the funds set aside for the children. She knows she would like to appoint her dad, Stephen, to manage her estate but Ellie does not want Stephen to be responsible for the ongoing management of a children’s trust, as he did not have the best relationship with Devon and the management could be ongoing for almost 20 years. Ellie appoints her dad, Stephen, to manage her estate as Executor; her ex-husband, Devon, as guardian for the children; and her brother’s friend, Morgan, as trustee of the children’s trusts.  

As we go through the planning process with our clients, we discuss these roles in detail, in the context of your personal circumstances. This may be helpful for those who are beginning to think about their estate planning goals.

Disclaimer: The information provided in this blog post is for general purposes only and must not be considered legal advice. For specific legal advice, please consult an attorney directly.

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