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Plan Well, Retire Well

Saving and investing your money
Guardian

Naming a Guardian for Your Young Child


Recently I had a conversation with my sister about her estate planning. She is expecting and I was curious to know what she had planned in the event that she and her husband were to pass away. Her response floored me: she told me "That's what godparents are for." Although godparents can definitely be a potential choice for a guardian, without documentation from a will to nominate a personal guardian, my sister's wishes would not be honored. Below are a few pieces of information I gathered from my research into the topic of guardianship:

Finding a Personal Guardian

If something were to happen to my sister, the logical person to take care of her minor child would be her spouse. If the unspeakable were to happen and both of them were to pass away – they would need to find a personal guardian that both of them could agree on. You must then ask yourself the next two questions:

 

You must feel confident in your choice as well as ask permission. You can't assume that someone will be your child's guardian. Some family member may be better equipped financially to take on the role of guardian for your child, while other may not. Whatever you reasoning for your choice, stick by it.

Put it in your Will

Once you have decided on your personal guardian for your child, make sure to contact a local estate-planning attorney to create or add this to your will. In your will, you can nominate your choice for the personal guardian. One thing to note: personal guardians cannot actually serve as the legal guardian until it is approved by a court. In most instances, the judge will approve your nomination, but if the guardian has any personal issues, the judge can appoint someone else. Leaving a handwritten letter including the reasons why you chose that person and why the choice is good for your minor child might be something you want to include in your estate planning documents.

The Uniform Transfer to Minors Act

The Uniform Transfer to Minors Act (UTMA) is a device for leaving property or life insurance to your children. Under the UTMA, you can name your child's guardian as a "custodian" to help supervise the property or money until the child becomes of age.

One way to help your guardian with the expense of adding a new child into their life would be to purchase term life insurance. You name your child as the beneficiary, and then name the "custodian" under the UTMA. To figure out how much term insurance may need you can check out this calculator from the United States Department of Agriculture to figure out how much it is to raise a child, especially if you live in New Jersey but your personal guardian lives in Texas. Other things to take into account for life insurance might be any debts that your estate must pay off (home mortgage, student loans and credit card debt) and costs for that child's future education. UTMA is not the only way you can leave property or funds to your child, there are other tools out there and I'll cover those next month!

Although estate planning is an uncomfortable topic, without proper planning, your wishes will not be carried out. The only way to make sure they are is by meeting with an estate-planning attorney and finalizing these documents for guardianship. Remember to ask your guardian if they want to serve and stick to your decision, put it in your will and use the uniform transfer to minors act to help your new guardian with their expenses. That way in the event something happens to you and/or your spouse everything is covered for your child.

Sasha Grabenstetter

Source: Clifford, D. (2013). Children. In Estate Planning Basics (7th ed., pp. 47-59). Bang Printing.



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