Estate Planning to Protect Your Children

If you passed away or became incapacitated, who would take care of your children?  What assets would be available to provide for your children?  Who would make decisions in your absence?  Is there someone you absolutely do not want to care for your children?  If you don't have a comprehensive estate plan, you probably cannot answer these questions with certainty.  Anyone with a child or children needs a comprehensive estate plan.  There are three primary estate planning tools used to protect children, a Designation of Guardian for Minor Children, Designation of Health Care Agent for Children, Contingent Trusts and Special Needs Trusts. 

Designation of Guardian for Minor Children

If you passed away or became incapacitate, who would you select to care for your children and their estates? A Designation of Guardian for Minor Children can be contained in your Will or executed as a separate document.  It is used to name a person or couple to care for your minor children if both parents of the children die or become incapacitated.  In most circumstances, if one parent dies, the surviving parent is the natural guardian of the minor children (even if the parents are unmarried or  divorced). This document may also specify persons you do NOT want to be appointed guardian. 

If you do not name a guardian for your minor children in your Will or ancillary documents, the court will make the decision for you.  Generally there is a priority for appointment based on familial relation, so the judge will decide who to appoint as guardian between your relatives (parents, grandparents, and so on), if there are any.  If you have named a guardian, the court must appoint the named person unless they fail to qualify or it is not in the best interests of the child.  If the designated guardian does not qualify or fails to serve for any reason (death, resignation, refusal), the court will look to the named alternate.  Only if the designated guardian and all alternates fail to qualify, do not serve the best interests of the child, or fail to serve, does the court proceed to appoint a guardian based on the statutory priority list.  You know better than anyone what is best for your children.  Deciding who to choose to care for your children in the event of your demise is a critical decision and should not be left to a court.

Designation of Health Care Agent for Children

If you plan on being away from your children for an extended period of time, a Designation of Health Care Agent for Children allows the person caring for your children in your absence to make medical decisions on behalf of your child.  For example, if you went on a trip and could not be reached when your child needed imminent medical attention, the agent designated in this document could make the required decisions. 

Contingent Trusts

Minor children who inherit property do not have legal authority to mange the property until they are 18.  Depending on the value of the property inherited, a child who inherits may need a custodian under the Texas Uniform Transfers to Minors Act to receive and hold the property, or alternatively the appointment of a guardian to manage the child's estate.  One way to avoid the necessity of a custodian or guardian, while ensuring children gain access to their inheritance at a responsible age, is to include Contingent Trusts in your Will. 

A Contingent Trust is a trust created by your Will which holds a child's inheritance until a specified age or ages.  For example, many people request the trust be drafted to allow the Trustee to make distributions to the child for his or her health, education, maintenance and support, with 1/2 of the trust property distributed to the child at age 25, 1/3 of the remaining property at age 30 and the balance at age 35.  Once the child reaches the maximum age established in the trust, the trust terminates and the balance distributes outright to the child.  This distribution scheme ensures the child does not gain access to the property until he or she is mature enough to handle the inheritance and distributing the funds in portions prevents a child from "blowing" all of the property at one time.    For the very wealthy, this scheme allows for children be taken care of, while not saturating them with funds, enabling them to do nothing with their lives.

Any person with minor children who is executing an estate plan should make sure their Will contains Contingent Trusts.

For most parents, their children are their pride and joy.  Don't fail to plan for their futures.  Make sure you secure a comprehensive estate plan which takes into account the needs of those most important to you, your children.