We have young children – What kind of estate planning do we need? – Estate Planning Attorney – Portland, Oregon

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The attorneys with Nay & Friedenberg explain why estate planning is important for couples with young children.

It is not a pleasant thought, but parents of young children need to consider the possibility that something may happen to them and they will not be able to raise their children until adulthood. Because minors do not have the legal status to make their own decisions about their care and finances, a responsible adult must make those decisions for them. In order for the parents to have control over the choice of surrogate decision maker in the event they have passed on, parents must do careful planning.

In the planning process, parents need to decide two important issues: 1) who will provide care and be the guardians of their children; and 2) who will manage the children’s inheritance? Trust is a major consideration, as is skill, aptitude, availability, and willingness to take on the role. In most cases, one person or one couple fill the role of both the guardian and the money manager. Yet¸in some cases, the guardian and the money manager are two different people. (In a few instances, the money manager is an institution, like a bank.)

In their wills, parents may nominate a person or persons to serve as guardian of their minor children. However, the nomination is just that: a nomination. Only a judge can appoint a guardian and the proposed guardian must petition the court for the judge’s approval. The parent’s choice of guardian plays an important role in the judge’s final decision, however; therefore, it is important for parents to express their preference.

Until the child turns 18, a responsible adult will have to manage the money for the benefit of the child. When the parent has done no planning, a court must appoint a conservator to manage the money at great expense and loss of privacy to the child. In most cases, a conservatorship should be avoided. Within their wills, parents can dictate who will manage the funds for the benefit of their children. Additionally, they have two choices for the level of control that the appointed person will have over the funds. Those choices are the legal status by which the adult manages the money, as either custodian or trustee.

A custodian can hold the money until the child turns 18, or up to age 25, if the parent dictates. This is a more informal approach than a trust and gives the custodian more discretion on how to use the money. The custodian will hold the money in a special bank account(s). The custodian is a fiduciary, and therefore required to use the money in the child’s best interests, but that discretion is given completely to the custodian. A custodian is not required to provide formal annual accountings to the child unless the child requests them.

If a parent wishes to have tighter controls over how the children’s inheritance is managed, they can establish a trust for the benefit of a child. Within the trust, the parent may nominate a trustee to manage the funds. The parent can also provide strict guidelines as to how the money will be used. Until the child reaches the age of 18, the trust must provide basic support of the child. After age 18, the trust can restrict distributions to the child for only specific uses; e.g., for education or the purchase of a home. The parent can dictate at what age the child receives the funds or can elect to continue to the hold the funds in trust for the remainder of the child’s life.

Although it is extremely unlikely that a parent will not live to see their children reach adulthood, it always remains a possibility. Careful planning as described above can give the parents peace of mind that, if something happened, their children would be well cared for.

An experienced estate planning attorney makes all the difference in making sure you have the proper documents to fit your planning needs. Contact the Estate Planning attorneys with the Law Offices of Nay & Friedenberg in Portland, Oregon at (503) 245-0894 to set an appointment.