ESTATE PLANNING WITH MINOR CHILDREN
Should Your Kids' Guardian and Trustee be the Same Person?
-F. Patrick Accisano, Esquire-
An important part of estate planning requires parents to name "fiduciaries" to manage the affairs of the children until they have matured. These appointments are usually set forth in the parents' wills, and assure that the kids will be guided and protected by responsible decision-making in the event that Mom and Dad pass away.
In New Jersey, the fiduciary entrusted with controlling the children's property is called the "Trustee". The person in charge of traditional parenting decisions (e.g. which doctor to use, what school to attend, where to live, etc.), is known as the "Guardian".
The Law allows parents to choose the same person to act as both Trustee and Guardian. However, a common issue in family estate planning is whether they should be the same person.
Unfortunately, there is no universal answer to this question. Rather, it depends on the circumstances of the parents, the children, the estate, and the fiduciaries. The parents' final decision on these issues should come only after careful deliberation, aided by the counsel of a qualified attorney. Some of the most relevant factors to consider are as follows:
- ADMINISTRATIVE CONVENIENCE - Appointing separate people to each fiduciary role often increases administrative burdens. Depending on how your estate documents read, the Guardian will be forced to request the money needed to raise the kids from the Trustee. This arrangement can make the Guardian's job of raising your kids even more difficult. Sometimes circumstances make this arrangement prudent (see below); however, appointing a single fiduciary as both Trustee and Guardian can simplify the lives of those you leave behind.
- ESTATE VALUE - Another issue to be confronted pertains to the value of the estate, i.e. how much money is involved. As a general rule, a Trustee need not be an attorney, accountant or financial advisor, but should have some level of business acumen (i.e. know enough to hire good attorneys, accountants and financial advisors to assist with the trust). However, if an estate contains substantial assets, it is often necessary to name a Trustee (either an individual or financial institution), who has particular expertise in the management of property and investments. This is especially true in New Jersey, where the Prudent Investor Act imposes a high degree of responsibility on Trustees in this regard. If the estate is sufficient value, it may be appropriate to appoint a separate expert or institution as Trustee or Co-Trustee. You should consult with your attorney if you have questions on this issue.
- CHECKS AND BALANCES - One advantage to naming different people to act as the fiduciaries is that it provides a system of monitoring. If the Trustee is being tightfisted to the detriment of the children, the Guardian will be aware and can take appropriate action. Conversely, if the Guardian is making undue requests for excessive monies, the Trustee will know and can take steps to prevent the wasting of the children's assets.
- CHARACTERISTICS OF FIDUCIARIES - The abilities and temperaments of the fiduciaries are a factor. In some cases, a person may possess the values and parenting skills of an ideal Guardian, but may have poor asset-management capability. Another person might be a wizard with finances and a good Trustee, but a lousy parent. You may know people who posses all of the necessary qualities to act as the sole-fiduciary. If not, it may be necessary to name different people to handle these roles.
- OTHER CONSIDERATIONS - I generally advise my clients to give their fiduciaries broad authority and flexibility in the handling of the children's affairs if feasible, regardless of how many people are appointed. This is especially true when children-beneficiaries are young, and such provisions will allow the fiduciaries adapt to the unforeseen circumstances that arise over the years. However, as the above examples illustrate, individual circumstances sometimes require parents to take additional steps to protect their children. In such cases, it is possible to provide additional instructions and restrictions on fiduciaries in estate documents. You should speak with your attorney if you feel that such measures would be needed in your estate plan.
© 2008 F. Patrick Accisano
F. Patrick Accisano is an estate planning attorney who focuses on the needs of parents with young children. He is a member of the Accisano Law Offices of Freehold, New Jersey.