young-family 91024Deciding on a guardian for your minor children may very well be the most important decision you’ll make regarding your estate planning. Not only must you trust the appointed guardian to raise your children as you’d want them raised, but you also need that person to be financially responsible with your children’s inheritance. For example, if you have an IRA or an annuity that you wish to pass to your minor children, how can you ensure those funds will be used properly—especially if the person you trust most to raise your kids isn’t necessarily the best with finances?

This question is multifaceted, so let’s unravel one aspect at a time.

The Question of Guardianship

Here’s the good news: The person who raises your minor children and the person who handles their inheritance don’t have to be the same person. If necessary, you can appoint one guardian to serve each function, naming one as the guardian of the person and another as the guardian of the estate. In this arrangement, you entrust one person with your children’s assets and another with their care, while enabling each to interact with the other. This dual guardianship model gives many parents peace of mind—knowing they don’t necessarily have to risk their children’s inheritance while ensuring that they are raised according to the family’s values.

Although guardianship of the estate is an option, for many families the best strategy for financially providing for the children is to use a trust. In that case, a trustee fulfills the responsibility that would otherwise belong to the guardian of the estate. The trust assets can be released to the children or the caregiver incrementally according to age and needs. For example, the trustee could distribute money for the children’s needs until age 18 and then manage for the money until the child is a financially mature adult. Your trustee may also exercise discretion in investing and distributing the funds for the children’s support, education, etc., coordinating with their physical guardian to ensure the children’s needs are met until they come of age. This can ensure that the assets are there when they’re needed for your family.

Passing an Annuity to the Children

Annuities pay out regular income—which can make them convenient vehicles to cover ongoing expenses for minor children. If you have set up an annuity for yourself or a spouse, you can name the children as beneficiaries, or you can also name a trust for the benefit of your children. If you are still paying into the annuity at the time of death, your children may receive the balance, or you may give a trustee the option of rolling the balance into another annuity to be paid out to the children at a later maturity date. If you are already receiving annuity payments yourself, the children may simply continue receiving these payments for the remainder of the term. Depending on your annuity contract, payouts may also be made lump sum. Annuities are a very flexible financial product with many different options. If you have annuity now, or if you are considering purchasing one, bring it up with us as we work on your estate plan so we can make sure it meshes with your will or trust seamlessly.

Transferring an IRA to the Children

Individual Retirement Accounts (IRAs) are also excellent vehicles to pass along wealth for minor children’s welfare—because, unlike most annuities, they have the ability to grow over time and can provide a lifetime of financial benefit to your children.

When you name the next generation as beneficiaries on an IRA, you effectively extend the IRA’s life expectancy. While the required minimum distribution payments to the children will be smaller than they would have been for you (since, according to the IRS’s rules, they have a longer life expectancy), the account balance can remain invested for growth over time. Your financial and tax advisor can evaluate your situation to help you decide which type of IRA (Roth or traditional) is the best option for your goals. And we can work with you to set up a trust which fully protects your IRA against your child’s creditors, predators, future ex-spouses, and immature financial decision making.

Planning for the welfare of minor children after your death is neither simple nor pleasant to consider, but it’s absolutely necessary for peace of mind. Determining the right person(s) to be the guardian of your children requires careful thought, but you don’t have to sacrifice your children’s inheritance for their proper care. With the right financial plan, you can manage both facets successfully. As always, we’re here to provide assistance and explain your options. Call our offices for an appointment today.

Dedicated to building your wealth, empowering your family and securing your legacy,

Marc Garlett 91024

Probate-court-hearingMany people think that if they die while they are married, the law dictates everything they own goes directly to their spouse or children. They’re thinking of state rules that apply if someone dies without leaving a will. In legal jargon, this is referred to as dying “intestate.” In California’s case, the specifics will vary depending on the type of property held and the number of children you have, if any. However, the general rule is that your spouse will receive a certain share and the rest will be divided among your children.

Now that may seem like, “So far, so good,” right? Your spouse is getting an inheritance and so are the kids. But wait. Here are some examples of how the intestacy laws can – and do – fail many common family situations.

First off, if both parents of minor-aged children die intestate, then the children are almost always left without a legal guardian. Kids won’t automatically go to a godparent, even if that’s what everyone knew the parents had intended. Instead, a court will appoint someone to be the children’s guardian. In such situations, the judge may not make the decision that you, as a parent, would have made. In fact, sometimes the judge appoints the last person you would have wanted to have custody of your children.

It’s important to note that when it comes to asset division, in most cases, state intestacy law presumes that a family consists of a husband, wife, and their natural-born children. But, that’s not the way all families are structured, and things can become legally complicated for those other families quickly.

According to Wealth Management, one analysis counted 50 different types of family structures in American households – 50! Almost 18% of Americans have been remarried, and through adoption and stepfamilies, millions of children are living in blended families. The laws just haven’t kept up, and absurd results often occur for these types of families if they’ve relied on intestacy as their estate plan. For example, stepchildren that you helped raise (but didn’t legally adopt) may end up with no inheritance, while a soon-to-be-ex-spouse may inherit everything from you.

Of course, with proactive estate planning, you can control your assets and essentially eliminate the risk of these crazy results.

Also, keep in mind that intestacy provides no asset protection or preservation benefits. Without any protections in place, an estate’s assets are vulnerable to creditors, lawsuits, and others who may claim entitlement to the property. These claims would take precedence over the statutory requirements for inheritance. In other words, the family won’t be first in line; they’ll be last. They’d only be able to inherit the scraps and leftovers.

The best way to safeguard and pass along what you’ve worked so hard to build is to do your own estate planning rather than leave things to the laws of intestacy. Protect yourself, your family and your assets by talking to a qualified estate planning attorney today.

Dedicated to empowering your family, building your wealth and securing your legacy,

Marc Garlett 91024

sad childI know it’s hard. Thinking about someone else raising our children stops us all in our tracks. But we must. If we don’t, and something happens to us, a stranger will determine who raises our children – and your child’s guardian could be a relative you despise or even a stranger you’ve never met. It happens.

No one will ever be you or parent exactly like you, but you can’t let that stop you from naming a guardian. In fact, the guardian of your children would easily become the most important person in their lives and could be the difference between them surviving the tragedy of losing you and going on to be happy, healthy, and successful or not. And while the likelihood of your guardian actually having to take over is slim, the consequences of having a stranger make that incredibly important decision could be dire.

If you have not named a guardian and something happens to you – a stranger who does not know you, your child, or your relatives and friends – will determine who will raise your child. Anyone can ask to be considered, and the judge will have the authority to decide. Keep in mind, too, families tend to fight over children, especially if there’s money involved.  And fights can lead judges to order the child into foster care until the matter is resolved. On the other hand, if you name a guardian, all of that can be avoided.

How to Choose a Guardian

Your child’s guardian can be a relative or friend. Here are some of the factors to consider when selecting guardians (and don’t forget to select back up guardians, too).

  • How well the child and potential guardian know and enjoy each other
  • Parenting style, moral values, educational level, health practices, religious/spiritual beliefs
  • Location – if the guardian lives far away, your child would have to move from a familiar school, friends, and neighborhood
  • The child’s age and the age and health of the guardian-candidates:
    • Grandparents may have the time, but they may or may not have the energy to keep up with a toddler or teenager.
    • An older guardian may become ill and/or even die before the child is grown, so there would be a double loss.
    • A younger guardian, especially a sibling, may be concentrating on finishing college or starting a career.

Remember, it Doesn’t Count if You Don’t Document it

I know it’s not easy, but don’t let that stop you. I’m happy to talk this through with you and legally document your wishes. And know that you can change your mind and select a different guardian anytime you’d like – also – the chances of needing the guardian you’ve named are small; but, you’re a parent and your job is to provide for and protect your children no matter what, so if you haven’t taken care of naming legal guardians yet, stop procrastinating and get it done.

Dedicated to empowering your family, building your wealth and securing your legacy,

Marc Garlett 91024

Modern-Family-91024A comprehensive estate plan can protect the things that matter most. For many, this means their property and their family.

Including provisions for the care of your children in your estate plan is essential for peace of mind. But many parents struggle with including provisions such as naming a legal guardian for their child. Indeed, even the fictional parents in the popular television sitcom Modern Family struggled with this issue in a recent episode. While Jay and his new and much younger wife Gloria agonized and argued about who they should name as a legal guardian for their children, their children were left at risk that if something happened before they decided and properly named guardians in a legal document, a judge would make the decision for them. Not ideal, under any circumstances.

When naming a legal guardian for your minor children, there are many factors to consider, such as whether the guardian has similar values to yours or can provide a welcoming home environment. But the toughest decisions are often the most important. Consider the outcome if you died without having legal protections for your children in place. Your children could be subject to conflict between relatives or they could be raised by someone you would never want, or in a way you wouldn’t want.  They could even temporarily be taken into the care of strangers.

Identifying and naming a legal guardian for your children in your estate plan is both a difficult and important task. Don’t put off naming a legal guardian for your child. While thinking about what will happen to your child if you die is difficult even for fictional parents, your kids deserve the protection and you deserve the peace of mind that a legal guardian provides.

Unfortunately, even if you have made the hard decisions, and even if you have worked with a lawyer to name legal guardians in a Will, your kids could still be at risk, because that type of plan would not take into account what happens if you become incapacitated, or if your named guardians all live far from your home, and it wouldn’t protect against anyone who may challenge your decisions. The only way to ensure your kids are raised by the people you want, in the way you want, never taken into the care of strangers (even temporarily) and that your kids would never be raised by anyone you wouldn’t want, is by creating a comprehensive Kids Protection Plan, which very few lawyers are trained to prepare.

If you are ready to take that step, start by sitting down with us. We can walk you step by step through creating a comprehensive Kids Protection Plan® that not only names a legal guardian for your child in your Will, but also ensures your kids are fully provided for, in the short-term and the long-term, and in the event of your incapacity.

Our number one goal is to ensure your entire family is protected and cared for no matter what. That’s why estate planning should be about more than just documents. It should be about ensuring you make informed and empowered decisions about life and death, for yourselves and the people you love.  The right estate planning counsel will help you get more financially organized than you’ve ever been before, and make all the best choices for your family throughout your lifetime. And there’s nothing better than that.

Dedicated to empowering your family, increasing your wealth and building your legacy,
Marc Garlett 91024