Why Parents Need an Estate Plan

Everybody should have an estate plan. But, planning is critical for parents with minor children. Surely, one of the things a new parent does is to make sure that they have life insurance to protect their young ones. Well, think of an estate plan as an extension of that life insurance.

First, and most important, every parent should think about whom they would want to raise their children if the parents were gone. This is by far the hardest thing for any parent to think about. But, it is the most critical. You don't want your children to find themselves the wards of the court. Court battles can be messy, and can take time. Meanwhile, the children may need to be in foster care until the case can be completed and a new guardian appointed. You want to make sure that you decide who is going to raise them. Plus, in Virginia, this step is easy to do. Appointing a standby guardian who can act immediately upon an emergency is a simple act of completing a one page document.

Once you know who could be taking care of your children, you need to give them the tools. In this regard, note that leaving a large sum of money to a minor directly is a bad thing. If no one is named as custodian, then there will have to be proceedings to name a guardian of the estate. This includes the appointment of a guardian ad litem to investigate the case. In Fairfax County, I've noticed that not all guardians ad litem understand the law completely and may insist that the money left to a minor, including insurance proceeds, be deposited with the court until the minor reaches eighteen. Plus, we have the added problem that under the law, any money left to a minor directly becomes the minor's money at age eighteen with no strings attached. How many eighteen year olds who you know are responsible to manage thousands of dollars given to them all at once?

The simple and most flexible solution is a living trust, either naming the potential guardian as the contingent trustee to take over after the parents' deaths, or naming another responsible person as the contingent trustee with instructions to cooperate with the potential guardian. Naming the trust as the beneficiary of life insurance proceeds should both parents pass is one way to make sure that all of the money is managed in a single, simple plan.

The point is that all of this is simple to create. It takes just a few meetings with a lawyer to plan, and some thought on the part of the parent. But, for a parent, it is one of the most critical things you can do to protect your children.

Beware the Contested Guardianship!

Guardianship proceedings exist to create protection for people who are no longer capable of making decisions for themselves. Often, a relative, such as an adult child, will bring a guardian petition when the mental abilities of an elderly person has started to deteriorate. Sometimes, a guardian petition is brought by a concerned family member to protect the elderly person from the exploitation of another.

In my experience, most guardianship petitions are uncontested and well-intentioned. But sometimes, a guardianship petition becomes just another phase in a bigger dispute among adult children. Far too often, disputes between adult siblings get heated because there is a belief that mom has money.

A contested guardianship case can become a problem quickly. In Virginia, if a guardianship petition is successful, and the elderly person's estate has the funds, all of the costs, including lawyers' fees, are paid from the elderly person's estate. If the adult children cannot agree on what is best for the elderly parent, and litigation ensues, this means that money that should be used for mom's care winds up getting eaten away by lawyers' fees.

Morally, adult children should give serious thought to just how hard they want to fight in a contested guardianship case. In fighting to control what happens to mom and her assets, the children could wind up throwing her money away.