What Parents Should Know — The Arbor Law Firm PLC

WHAT EVERY PARENT SHOULD KNOW ABOUT ESTATE PLANNING

We’re familiar with their stories — Harry Potter locked under the stairs, the Little Princess sleeping in a spidery attic, the Boudelaires in constant peril from what is possibly the worst guardian in history — as many of our favorite children’s stories are based on orphans facing hardships and overcoming obstacles. While Dickensian scenarios make for good literature, they are not what most parents have in mind for their own children.

Although most parents agree that they should have an estate plan in place, many are bogged down with two specific conflicts: Lack of time, and the very emotional dilemma of choosing guardians. Despite these challenges, the importance of a good estate plan cannot be overstated, and parents may find it easier to overcome demanding schedules and mental gridlock if they take time to understand the role proper planning plays in the continuation of their children’s quality of life. Parents with small children need a properly prepared will no matter the size of their estate, as the nomination of guardians and creation of children’s trusts outlined in a well-drafted will are crucial, regardless of the amount of assets on hand.

Preparation of a satisfactory estate plan is not as time-consuming as many people fear, and should take priority over other household “musts” such as mowing or re-seeding the lawn, painting the bathroom, or giving the kitchen a good cleaning. Although family schedules in the NoVA region are stretched tight, parents absolutely must prioritize the preparation of a good will, for at least two primary reasons.

Without a will, determination of a guardian for children is left to the courts. When parents pass away without a will, the court system must sort through the available pool of relatives or other close care-givers to select who will be granted the role of physical and financial guardian of a minor child and the minor child’s property. Relatives or other interested persons can step in and request appointment, and the best person for the job may not always be the first person to volunteer. Courts in Virginia take the selection of guardians very seriously, and put forth great effort to grant custody to persons who are best able and qualified to step in as the primary caregiver for a child — however, without a proper will, it is impossible for the deceased parent to have a voice in this selection process.

A properly executed will is admitted to court for probate, and a good document nominates primary, secondary, and even tertiary guardians. The will therefore becomes the vehicle for communicating parental preferences in awarding guardianship. When it is anticipated that other family members may challenge a guardianship nomination, parents can also attach a letter to the executed will, which if prepared properly can be given weight in court to further explain guardianship preferences. Good planning and prior communication with relatives can help alleviate the painful process of custody hearings or family in-fighting for guardianship, thus easing a child’s transition from one household to another. Well-crafted letters of explanation can also reduce the emotional collateral damage that may sometimes result from guardian selections as well.

Without a will or trust in place, children stand to manage their inheritance, including life insurance proceeds, at age eighteen. When a minor (anyone under the age of 18) is in a position to inherit any portion of an estate, the courts will typically establish a financial guardianship or custodianship for the assets, to be managed until the minor comes of age. No matter the size of the inheritance, and no matter the maturity level of the beneficiary,* the financial management and judicial oversight provided for these assets evaporate when that child turns 18. The entire amount is turned over to the new adult, without further requirement for oversight, management, or formal accounting, and the receipt of cash assets, including the value of the equity in your home or your life insurance proceeds, can (and often does) affect important decisions such as college attendance or timing. In the worst-case scenario, young adults can fall victim to financial scams targeting young beneficiaries, at a time when they may be at their most vulnerable.

A well-written will should include language that establishes a trust for beneficiaries under a certain age (such as 25, 30, or even 35). Such trusts are included as a safety net in the will, and create an entity that will protect assets for the long term, while allowing beneficiaries and guardians access to the funds for the health, maintenance, education, and general support of the beneficiary. Once your child reaches a more appropriate age for money management, the funds can be turned over to that child for personal management; by that time, the beneficiary has matured and is better prepared to manage the assets. A solid, comprehensive estate plan also directs that life insurance proceeds are poured into such trusts for children, further ensuring that assets are available for the long-term support of the child.

Wills included in an Arbor standard estate plan not only establish testamentary trusts for young beneficiaries, but also nominate trustees and back-up trustees to help manage the assets, or to provide oversight and distribution guidance to a professional financial institution managing the assets until your children reach an appropriate age.

Don’t make the ‘perfect’ the enemy of the good in selecting guardians. No one knows your child better than you, and choosing a successor in this role is usually one of the toughest decisions for parents to face. This indecision is often the biggest impediment to creation of an estate plan, as parents either cannot decide on the best guardian for a child, cannot envision any other person raising their child, or when parents cannot reconcile their respective opinions on the matter.

Every parent must understand that there will never be a perfect successor guardian. Children are unique as is the care given to each child, but falling into the trap of “making the perfect the enemy of the good” only delays putting a protective, perfectly reasonable estate plan into place. After considering that doing nothing forces a court to make guardianship decisions without parental input, it is certainly preferable to create a plan that includes good, appropriate guardians rather than waiting for the perfect option to fall into place.

Time constraints and emotional roadblocks keep many families in the Northern Virginia area from creating a solid and comprehensive estate plan, but parents need to reassess scheduling priorities and overcome the hurdles to starting the process. Finding the time and the emotional fortitude to face planning can be daunting, but most parents find they feel better and sleep easier knowing they’ve done the right thing when the final documents are signed. And while being raised by an evil stepmother may not have hindered Cinderella’s eventual appearance at the ball, it is doubtful that this is the upbringing her father had in mind.

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*The exception to this is a child with disabilities.