Got minors? If you have minor children there are a few things you must do and a few things that you should seriously consider when preparing your estate plan.
Topping the “must” list: naming a guardian for your minor child. There is nothing more important than electing a person to care for your minor children should you become incapacitated or die. The state of California has specific rules for the distribution of your assets if you die without a will, but when it comes to your children the waters get murky.
There is no family code section that provides an “order of preference” when both parents are deceased. The closest section on point is Family Code Section 3040, which provides that “custody should be granted in the following order of preference according to the best interest of the child as provided in Sections 3011 and 3020.” However, this assumes that either both parents are alive or a single parent is alive. If neither parent is alive, the court will still look to “the best interests of the child.” I don’t know about you, but that seems a little unclear for me, especially when it comes to my kids.
So what do we do? In your will, you can nominate a guardian. This removes all of this uncertainty and potential for interpretation when a judge is trying to determine what is in “the best interest of YOUR child”. I often recommend naming several successor guardians for your child. When it comes to your kids, can you ever be too safe?
Something many people don’t consider is the divorce of married guardians. Let’s say that you want to name your brother and sister-in-law as guardians of your child. After your untimely death, they wind up divorcing. Which parent gets your children? Do you want your children to be pawns in someone’s divorce? In this case, you would need to state that you want your brother to be the sole guardian in the event of their divorce. This helps the court ensure that your child remains in your family (i.e., with your brother). Most people want this clearly spelled out so that the court has no doubt as to their wishes. That way, they know their children won’t be caught up in divorce proceedings or a custody battle.
First we were talking about protecting your kids from others by naming proper guardians, but how about protecting them from themselves? Let’s take a look at an item from the “should do” list. Under California law, if a minor receives an inheritance, whether it is through a will, life insurance or even an IRA or 401(k), the minor will receive that money on their 18th birthday with no restrictions or contingencies. Oh dear.
If you think back to your 18th birthday – I mean your actual 18th birthday — were you responsible enough to handle any amount of money? Probably not. Restricting the time and manner in which your children receive their inheritance is very important. Give your children time to mature without the possibility of them squandering your hard earned money. By delaying when your children receive their inheritance you increase the chance that they will not only retain your wealth but grow it for their own children. Only a well conceived estate plan can accomplish this.
There are plenty of other considerations when estate planning for your minor children. Be sure to speak with an estate planning attorney — before it’s too late.
Eric S. Gullotta, JD, CPA, MS (Tax) focuses on estate planning and taxation law. His office is located at 232 West Napa Street, Suite A, in Sonoma. Contact him at 938.7234 or visit Gullottalaw.com.