Parents of children under 18 need an estate plan that includes the designation of a guardian to oversee the financial arrangements made for minors. Correspondingly it is vital for the appointed guardian to understand the finances involved. Law experts offer advice for prospective financial guardians.
Understand The Financial Arrangements
Kiplinger reminds us “while it’s an honor to be asked to be the guardian of someone else’s children in the event of a tragedy,” taking on this tremendous responsibility of course merits careful consideration. Looking out for the financial well-being of minors in and of itself is a big undertaking. The Law Offices of Kyle E. Krull recommend that potential guardians ask plenty of related questions, including these:
- If the parents die, will they leave behind enough money to pay for the needs of the children until they reach adulthood?
- Do the parents have a college fund set up for each child?
- Will you be asked to use your own funds to buy food and clothes or pay for medical appointments and extracurricular activity?
- Inquire about any estate planning legal documents and their content.
- Does the couple have a last will and testament or a trust?
- Who has been appointed to serve as the executor or the trustee?
- Are any conditions in place for the use of funds to benefit the children?
It’s helpful to keep in mind that a guardian appointed to assist with financial needs of a minor, disabled, or elderly person may be required to obtain a guardianship bond to safeguard the interests of the ward in accordance with applicable state law. The requirements of the bond vary from state to state. Essentially, a guardianship bond, is a type of fiduciary bond: it legally obligates guardians to protect the affairs of their “wards” in accordance with all applicable state laws. Learn more about guardianship right here
It’s quick and easy for fiduciaries, including guardians, in every state to obtain their fiduciary bonds from leading national provider, Colonial Surety. The steps to obtaining a guardianship or other bond at Colonial are easy: get a quote online; fill out the information, and enter payment. Then, just print or e-file the bond in minutes.
Estate planning attorney Leigh Hilton observes that procrastination when it comes to estate planning and the designation of guardians for minors is a common mistake, and while understandable, suggests it’s best to get on with it: “The reality is that none of us can predict the day we will pass away, so putting off creating an estate plan altogether or neglecting to revise your estate plan when life circumstances bring change is a recipe for disaster for you and your family.” Hilton additionally points out the importance of life insurance: “If you are the income provider for your family, you need to have enough life insurance to see the family comfortably through a difficult financial and emotional time.”
Good To Do: 529 Plan + A Trust?
With education of the next generation a top priority for many families, lawyers at Adler, Pollock& Sheehan point out that family members, including parents, grandparents and others, can use a state-sponsored 529 plan to make cash contributions for the educational needs of children—and might find it even more beneficial to establish a trust that holds the 529:
Establishing a family education trust to hold one or more 529 plans provides several significant benefits:
- It permits you to maintain tax-advantaged education funds indefinitely (depending on applicable state law) to benefit future generations and it keeps the funds out of the hands of those who would use them for other purposes.
- It allows you to establish guidelines on which family members are eligible for educational assistance and direct how the funds will be used or distributed in the event they’re no longer needed for educational purposes. You can also appoint trustees and successor trustees to oversee the trust.
- It can accept non cash contributions and hold a variety of investments and assets outside 529 plans. For example, the trustees might invest in hedge funds, private equity funds, life insurance or other alternative investments if they conclude that the increased returns would outweigh the tax cost.
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Founded in 1930, Colonial Surety Company is a direct writer of a wide range of bonds and insurance products. Colonial is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed, and licensed for business everywhere in the USA.