Planning for Parents’ Incapacity and Death
We need to plan for two situations when minor children are part of a family:
Temporary Guardian. At least one parent is alive and incapacitated, and the other is either also incapacitated, deceased, unable to function as a parent, or has their parental rights terminated. Here the child needs to be taken care of until at least one parent recovers the ability to assume parental responsibilities.
Permanent Guardian. Both parents are deceased. In this case a permanent guardian needs to be appointed for the child to raise them to adulthood.
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For the temporary guardianships, we need to establish a special kind of power of attorney – the “Guardianship Directive”. This authorizes someone to step in the parent’s shoes and have parental authority over the child. It may not seem important, but if the child needs medical assistance, or an issue arises with the schools or the law, proper authority needs to be in place to avoid the courts and social services from getting involved.
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For permanent guardianships the primary need is to structure assets to make sure the child’s financial future is cared for. To do this, we build into the will a “testamentary trust”, or, if using a revocable living trust plan, we build into it a “nested trust” (the two trusts are essentially the same thing for different types of estate planning). This trust manages the assets for the child at least until the child reaches the age of majority (18 in Minnesota). More often than not, we extend the trust to manage assets until the child is a bit older – often age 28 or 30. While the trust exists, assets are available to the child for everything from basic needs to education to making a down payment on a house. Moreover, assets within the trust are protected, both from the child (no trips to Vegas with trust assets), and from other things such as creditors, divorce, bankruptcy, law suits, etc.
Let’s Start Planning
Planning for minor children can be an important part of your estate planning process. If you’re ready to get started or have any questions on planning for minors, we can help. Simply schedule a free consultation so we can answer your questions and find out the best way to secure your legacy and the future of your children.
