An Estate Planning Blind Spot: Choosing Guardians for Minor Children
| Publication year | 2007 |
| Pages | 0036 |
| Citation | Vol. 47 No. 4 Pg. 0036 |
2007 Winter, Pg. 36. An Estate Planning Blind Spot: Choosing Guardians for Minor Children
Winter 2007, Volume 47, No. 4
Judicial Legacies
A. Introduction
For parents of minor children, deciding who should be guardian for the children(fn1) in the event of the parents' untimely death is one of the most difficult estate planning choices they must confront. In many cases the decision can be so difficult and divisive that the parents either procrastinate or find themselves deadlocked, unable to agree over a suitable candidate. Paralysis over this issue is among the reasons that a majority of American parents of minor children have no wills.
The choice of a guardian is, however, one of the most important aspects of these parents' estate plan. If called upon to serve, the ideal guardian will oversee the upbringing of the children by providing a safe and loving home. The guardian will serve as an adult role model, providing supervision, encouragement and discipline as needed. He or she will attend to each child's social and intellectual development, helping the child through the trials of adolescence and beyond, assisting with educational and career decisions, and generally supporting the child on the road to becoming an independent adult.
Despite its importance, the careful crafting of guardianship provisions in wills and revocable trusts are often overlooked by estate planners who are apt to focus more attention on things like tax avoidance. This is unfortunate; a parent will lose far more sleep agonizing over the welfare of their possibly orphaned offspring than the risk of forfeiting a unified credit.
This article offers information and options that an estate planning attorney can use to provide more meaningful counsel to clients on:
(i) New Hampshire law regarding the appointment and supervision of guardians of both a minor's person and estate;
(ii) factors the client should be encouraged to consider in choosing among guardianship candidates, and
(iii) related economic and financial planning issues.
In appendices to be posted with the online version of this article (See Publication Archives at www.nhbar.org) language is provided for insertion to the clients' documents to give the chosen guardian sufficient guidance and financial wherewithal to perform critical guardianship duties in an informed manner and without undue financial stress or concerns about conflicts of interest.
In light of my purpose to aid New Hampshire attorneys, the balance of this article will be directed toward a hypothetical client: a parent or married couple with one or more minor children.
B. Paralysis: A natural response, but a potentially costly one
If you are inclined to avoid the issue completely and neglect this aspect of estate planning, consider the toll on those you most want to protect - your children:
1. Someone you dislike could end up as guardian. Unless you state your preferences, a judge could appoint anyone who applies and who seems appropriate for the job.(fn2)
2. The guardianship hearing might be contested. More than one applicant may have to litigate the issue, (fn3) thus setting the family up for an expensive dust-up which will cost everyone but the lawyers.
3. Or the worst possible scenario: no one applies, leaving the children to be left with a reluctant or unsuitable family member. Or they may end up in foster care - an uncommon result but not without precedent (look what happened to Cinderella).(fn4)
C. Important Considerations in Choosing Suitable Candidates.
1. The desires expressed in the will are non-binding but are almost certain to be respected. Generally, if you are married, you will express your preferences as to guardian in your wills. (fn5) Under the laws of roughly half the states, a parent's nomination is binding and the court has no discretion to overturn it. (fn6) In New Hampshire and the other states, however, a probate judge can disregard the parents' choice if, after a hearing, the court determines that the chosen guardian is unfit or unsuitable. (fn7) The probate courts have a protocol for background checks on prospective guardians - both criminal records' checks conducted by the New Hampshire State Police and a search of the abuse and neglect registry maintained by the Division of Children, Youth and Families (DCYF). (fn8) The court is required to take into account the minor's preference and "give it such weight as under the circumstances may seem just". (fn9) If one or more of the minor children is over age 14 the presiding judge will give particularly careful consideration to their expressed desires. (fn10)
Thus, as a practical matter, the court will give first consideration to the individual nominated by your will. But be aware, however, that there is no absolute guarantee that this choice will be carried out. (fn11)
2. Make a list of the criteria most important to you. Consider the case of a client of ours whom we will call "Mary". Mary was a divorced mother and primary custodial parent of her minor son "John" who was then age eight. Mary characterized as "frosty" her relationship with her ex-husband Don (John's father). Still, she and Don were able to put aside their differences to cooperate in choosing a guardian to replace them if they both should die.
To start, Mary and Don each made lists of the criteria they felt were most important before meeting to go over candidates. She told us that the process "forced me to consider what was most important to me concerning how John might be raised in my absence". Making the list also helped rationalize an exercise which might otherwise have been driven by emotion. The list Mary and Don made was confined to candidates in two-parent households with no more than three children who were close in age to John; those who were economically independent and had a standard of living similar to Mary's; parents who in the raising of their own children demonstrated that they shared Mary's and Don's religious convictions, value system and child-rearing philosophy, and those who lived nearby so that John would not be separated and removed from his school, social groups, sports, etc.
3. Try thinking unconventionally. Many people are instinctively inclined to name their siblings. But you also can consider close friends, neighbors - even the child's grandparents if they are relatively young (more on the grandparents later). (fn12) Some name an adult child to look after his or her minor siblings. Beware, however, that this can often be unfair to both the caregiver and the minor children - if, for example, the oldest son is chosen and he has just entered college only to inherit the responsibility for his little brother and sister. This possibility of naming an adult sibling has become increasingly rare in today's smaller families. There is less likelihood of a significant age differential between the oldest and the youngest children. But it can be a good solution in the right circumstances. One concern regarding this type of arrangement is each minor child's perception of the older sibling's moral authority (a factor which should be easy for any parent to assess).
4. Consider separating the nurturing and financial functions. Some people are great at raising kids but not so good with money, or vice versa. There are two types of guardianships available for minors: a guardian of the "person" responsible for the care, custody and rearing of the child; (fn13) and a guardian of the child's "estate", responsible to manage any funds owned by or left to the child. (fn14)
Fortunately, you need not find someone who can both nurture the children and manage the funds. (fn15) Naming separate people to handle the child-rearing and the money will often end an impasse between partners who disagree over who is best among a list of candidates. Such deadlocks often stem from a lack of understanding of the very different parenting and financial roles, and the couple's mistaken assumption that the same person must perform both of them. Even if all of your candidates are good at both, you might still want to name someone other than the guardian as manager of your child's money to avoid the possibility that the guardian may get into trouble for commingling personal assets with guardianship funds - an act of prohibited "self-dealing" and a breach of the guardian's "fiduciary" duties to the child. (fn16)
Note also that the primary financial manager need not be a probate court-appointed-guardian of the child's estate. We encourage most of our clients to name a separate trustee under a revocable trust agreement to serve as both the court-supervised guardian(fn17) of the child's estate(fn18) and non-court supervised trustee of the children's trust.(fn19) This avoids intrusive and expensive probate court supervision of most (if not all) of the finances, and creates a system of checks and balances over how the money is spent. It also requires the personal guardian to make a case to a third-party trustee to commit the children's trust for unusual expenditures.
The "pour over" revocable trust agreements we prepare for parents of minor children often allow the trustee to expend trust funds not only on the children directly, but also for the benefit of the guardian's household and the guardian and the guardian's children if necessary to create a harmonious, integrated "blended" family. This avoids the situation where your trust might allow your children travel, recreational and education opportunities unavailable to the guardian's children, effectively creating a first- and second-class citizen structure within the family. [Examples of such provisions are posted as Appendices A and B in the online version of this article.]
5. Avoid the...
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