Naming a guardian in your will is not always enough.
A primary motivation for parents of young children to make a will is to name guardians for their minor children. The parents can appoint a guardian of the person or of the property of a minor, or both. Guardians of a minor child’s person are responsible for the child’s upbringing; they take over the role of the parents. Guardians of a child’s property are responsible for the management of the child’s property.
This blog’s main focus is on the guardian of the child’s property. The scenario arises when the parent(s) have pre-deceased the child(ren) who then stand in line to inherit their parents’ wealth under the terms of the will.
By no means a guarantee that the named guardian under a will shall be appointed, seldom do the courts go against the wishes of the deceased parent(s), unless, of course, there is good reason (i.e. the proposed guardian has a history of irresponsibility).
Once appointed, the guardian of the child’s property “shall protect, preserve and manage the property of the infant” up until the time the child reaches the age of 18 years. In practice, once the guardian is appointed, the court will generally order that the estate be liquidated and placed in a special type of guardianship account.
Because the court has power over the property of a child, the guardianship is severely statutorily regulated and the guardian’s functions are restricted. Annual accountings of the guardianship account will be required, property will be secured by a fiduciary bond and the court (not the guardian), must determine the reasonableness and amount of expenditures for the child.
Creating a ‘testamentary trust’
The restrictions placed on the guardian of the property as to expenditures, although highly secure, is a cumbersome process for meeting the financial needs of minor children.
Whereas it is always advisable to appoint a guardian of the child’s property in a will, the best plan is to create what is called a testamentary trust for the benefit of the children. A trustee of the trust can flexibly meet the children’s needs for maintenance, support, education, and the like. The trustee must act in accordance with the specific directions and guidelines as set out in the will.
Eligibility for trust can be raised from 18 years to 25
Another major reason (and usually the biggest reason!) behind why parent(s) need to consider incorporating a testamentary trust for the benefit of the child(ren) is that unlike a guardianship of property, which results in the child receiving all funds at age 18, the trust can run to a more mature age. Over the years of drafting wills and assisting parents of young children, the consensus view is that 25 years is a suitable age for a child to inherit. Parents tend to feel that at 25 years a person is more likely to spend less frivolously (eg. settle outstanding student loans).
When drafting a will, the testamentary trust, coupled with the appointment of a guardian of the minor’s person and property, results in an efficient and flexible plan.
Antony Eminowicz, PLLC is the principal of Murad Law, a Kingston firm that specializes in elder law, estate and special needs planning. He is also the proud father to two young boys (who also keep him very busy!)
Source: http://hvparent.com/estate-planning-what-you-need-to-know-for-you-childs-sake
