All parent wants to make sure their children are taken care of in the event that they become disabled or die before the children reach adulthood.
Young children often inherit assets from parents or other relatives. Even if guardians have been designated to care for the children, many times no provision has been made to manage the financial resources left to these children. Unintended consequences are common.
A surprising number of parents with minor children have not even taken steps to create and estate plan and name a guardian for their children. Many of those who have taken these steps assume that the person acting as the guardian will have the authority to handle the inheritance and insurance that was left to the minor children. This is not the case. While those who have the legal authority and obligation to care for another person are called Guardians, those charged with managing the assets for another person are called Conservators. Both Guardians and Conservators must be appointed by the court in order to have the legal authority to act on behalf of the children.
Anytime money is left directly by name to a person in Georgia who is under 18, a conservatorship must be established. This is true whether the child inherits by law or will or as a beneficiary of an insurance policy or retirement plan. Creating a conservatorship is done through the probate courts and can be a lengthy process requiring significant investment of both time and money to establish and maintain. The court will require the Conservator to pay for an insurance bond to insure the child’s assets against any wrongdoing by the Conservator – this is true even when the Conservator is the child’s parent. Because the child is under 18, the court will appoint an attorney to safeguard the child’s interests. Cost for the child’s attorney, the conservator’s bond as well as all other administrative and legal expenses are paid out of the child’s inheritance reducing the funds actually available to care for the child.
Once appointed by the court, the Conservator is authorized to manage the child’s assets and to spend money for the needs of the child. But not without court supervision. Periodic inventories (usually annual) are filed along with asset management plans which are requests for approval from the court for the use of funds over the next year. Any expenditures not anticipated on the asset management plan must be approved by the court to allow the Conservator to spend the money in the conservatorship.
These administrative and court costs continue until the final inventory and report is filed and the conservatorship comes to an end. On the child’s eighteenth birthday, the funds are released without restriction to the child. All the assets that have been so carefully protected become subject to the judgment of an 18 year old. Maybe this is not the best plan.
There is a better way. An estate plan for parents should include not only a nomination for Guardian for minor children, but also testamentary trust planning that creates a way to manage funds for the children and designates the right people to manage them without court intervention. The cost of effective estate planning in advance is far less than the costs of conservatorships and keeps more money where it belongs – in the family. Maybe best of all, parents can set up support and guidance for their children that does not suddenly end on their eighteenth birthday but gives them protection into young adulthood.
A good estate plan will contemplate all of these issues and plan accordingly. Consider the benefit of establishing a trust in your will and naming a trustee to manage the child’s inheritance. You can also decide when the children will inherit and under what terms. You also decide who will be the gatekeeper for the inheritance – you will be able to choose the person whose has similar values and good judgment. You can plan for the needs and circumstances of each individual child. Most importantly, this trust planning can protect your child’s inheritance from court costs, irresponsible spending, future creditors and even divorce. The possibilities are endless and can ensure that you continue to protect your child’s inheritance long after your death and your child’s 18th birthday!
James M. Miskell received his law degree from the University of Georgia in 1993. His Asset Protection and Estate Planning Law practice is located in Lawrenceville, Georgia. He offers free educational workshops and consultations to assist clients as well as fellow professionals in creating individualized solutions.
For more information visit www.letstalkestateplanning.com
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