In June we celebrate Father’s Day, honoring dads who devote themselves to raising children and building families. New fathers actively engaged in their children’s lives understand their responsibility to plan for the future. While the idea of parents dying and leaving young children without loving parents is unimaginable, it does happen. Minor children need the protection parents can provide with an estate plan, both financially and emotionally.
The first part of estate planning for fathers concerns a will. This legal document is used for more than distribution of assets—it is used to name the individual or couple who would be the minor children’s guardian if they were without parents. In the absence of a will, the court selects a guardian for the children. The person might not be someone the father would want to raise his children and might not even be a family member.
A concern to take seriously: while the court is doing its work, who will care for the children? They may be placed in foster care if there is no will and no guardian has been named. You don’t have to be a trained psychiatrist to know it’s far better for children during a traumatic time, especially babies, to know the person caring for them. Even infants recognize the difference between familiar faces and the faces of strangers.
The will is also used to name the person who will oversee finances for the children, referred to as the custodian. Children under the age of 18 may not directly inherit money or take control of property. Instead, a custodian is named to be in charge of assets until the children reach the age of majority, which is 18 in most states. If there is no will and no planning has been done, the court will appoint custodian.
These two people—the guardian and the custodian—will be working together and making major decisions about the children until the children become legal adults. They need to be trustworthy, responsible and in the case of the guardian, loving and supportive. They also need to work well together.
A third person may be involved in the minor children’s lives in the absence of their parents: a trustee. In many estate plans, trusts are created to own the assets for the children. The trust is managed by the trustee, who has a legal duty to follow the directions in the trust. The advantage of a trust, and one fathers should consider quite seriously, is the greater control over how assets are distributed provided by a trust.
Imagine a child raised by a guardian who reaches age 18 and has access to what seems like unlimited funds. Even the best 18-year old presented with such a situation could easily be tempted into all kinds of reckless behavior.
By placing assets, including proceeds from life insurance policies, within the protective walls of a trust, the trustee controls assets when the children are minors and after the children turn 18. The trustee can be instructed to distribute a certain amount of funds, tied to the beneficiary’s age, needs or accomplishments. Distributions can be earmarked for college or trade school expenses. Money can be set aside for a down payment on a home. The trustee can also be given discretion to be able to make decisions based on the guidelines of the trust, with an eye to the child or young adult’s unique situation.
All of this seems so far away when a new father is holding a sleeping baby in their arms, but life has a way of moving ahead swiftly. Unexpected things happen, and they are not always what we would wish. To protect a family, create a legacy and prepare for the future, young fathers are wise to invest their time and attention to estate planning.