One of the primary reasons that parents give for early estate planning is the desire to provide security for their children if anything bad should happen to them at the same time. Naming a guardian helps to ensure there is someone you love and trust to watch out for your children if you can’t care for them yourself.
Sadly, while people may take the step of naming a guardian, they may not consider how the stress or temptations of guardianship could change that person negatively and impact the care their children receive. Even someone you know well and implicitly trust could engage in abusive or inappropriate behaviors toward your children, especially if there is a financial incentive to do so.
Financial abuse toward minor children can have a long-term impact on that child’s financial, social and educational prospects. Thankfully, careful estate planning can help concerned parents reduce the risks.
A guardian typically has control over a minor’s inheritance
If you die when your children are minors, a guardian must step up to provide care for them. That individual will not just provide them with housing, food and clothing, but they will also manage their finances and legal circumstances.
The assets you leave behind for your children could wind up wasted on frivolous purchases made by the guardian you entrusted with the safety of your children. Creating a trust ensures that what you leave behind will only go toward the care and maintenance of your children.
Naming someone as trustee provides oversight for the use of funds
A trust creates another layer of protection for your children. By placing financial assets and even your family home in a trust instead of bequeathing them through a will, you help ensure that those assets will support your children and provide financial resources for the guardian for their cost of living expenses.
If you name the guardian the trustee, there will be no one to monitor their activity and make certain that the use of assets is appropriate. Having one or more people serve as trustee to oversee how the guardian accesses and uses inherited assets intended for your children will protect those assets and ensure that your children have something to rely on when they get older.