The thought of your children having to grow up without their parents is, of course, a grim and terrifying notion, but proper planning can provide great peace of mind as well as efficient personal and financial care for your loved ones. Below, you will find a brief explanation of the options that are available to the parents of minor children for creating a support system to care for the minor child and his or her estate if neither parent is able to do so.
Naming a Guardian in a Will
A Will allows the parents of a minor child (under age 18 in Illinois) to name the Guardian of the child and his or her estate as well successors in case the initial Guardian is unable or unwilling to act. The Guardian is the individual or individuals selected by the parents, or by the court if the parents fail to leave a Will, to look after the child and any assets that he or she owns outside of a trust (see below) in the event that neither parent is able to do so.
Generally, a court will favor a surviving parent’s right to custody. However, if the surviving parent is unfit to care for the child or if both parents are deceased, then a court will recognize a Guardian (or successor) named in the parent’s Will. Unfortunately, unlike the passing of assets, there is no statute that provides a standard system for the court to appoint a Guardian in the event that the parents fail to do so. If the parents die without leaving a Will and appointing a Guardian, a court must fill the vacant position, which can lead to infighting amongst the relatives and friends of the deceased parents.
Similar to Powers of Attorney for Health Care and Property, a Will can be a fairly simple document, but the common failure to have these documents prepared usually leads to significant court costs and lengthy disputes.
Setting Withdrawal Terms with a Trust
In Illinois, the assets of a beneficiary under the age of 18 must be held by a Guardian. During this time, distributions from the account must be approved by the court. At age 18, the Guardianship is terminated and the remaining assets are paid out in full to the beneficiary. However, most parents would agree that children are not responsible enough at the age of 18 to manage a large sum of money, maintain real estate or handle investment assets. Even parents whose children have surpassed age 18 usually determine that rather than permitting a large withdrawal by the beneficiary at the time of the second parent’s death, withdrawals of the inheritance should be staggered until later ages, often age 40 or 50. The best remedy for this issue is to utilize a Trust for the benefit of the child along with your Will.
A Trust allows you, the parent, to determine (1) who will act as Trustee for your child’s benefit, (2) the purposes for which distributions may be made and (3) the ages at which the beneficiary may withdraw specified amounts. Additionally, distributions from the Trust can be made without court supervision and withdrawals can be delayed if the trustee determines that it is not in the best interest of the beneficiary to make a withdrawal at that time—for example, if the beneficiary is having creditor or addiction problems. By utilizing a Will and a Revocable Living Trust together, a parent can not only ensure that the individuals of their choice will be designated Guardians of their children but also that the children will be provided for until they are responsible enough to manage the assets on their own.
Of course, everyone involved hopes that such Guardianship provisions never come into play, but if they do, it is far easier and more efficient to prepare in advance than for your loved ones to have to clean up the mess after the fact. For parents with minor children, combining a Will with a Revocable Living Trust provides the maximum peace of mind in terms of protecting their children, personally and financially, until they can handle themselves and their assets on their own.