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Agonizing decision. The most difficult decision for most parents is who will take care of their children in the event that the parents have a horrible accident and die before their children are grown. Once made, this decision is set forth in their will as the choice for guardians of their children.
Blended families. This choice has become more difficult now that many families are raising children from a prior affair, from a prior marriage or from their own children. The ex-lover is gone and may have little to do with the children of the blended family. But, if both spouses die, the surviving birth parent will have a priority claim for custody of the children. We discussed the planning options in a recent blog as to how to deter an irresponsible birth parent from obtaining legal custody in: “Who Will Take Care of Your Children If You Can Not?”
Guardian Does Not Control the Money. A touchy problem is who will control the money for the children. There is no legal requirement that the person in charge of your money (trustee or executor) be the same person who has custody of your children. The guardian may be a wonderful care giver – an ideal stay at home mom with a helpful and supportive husband – but they may be lousy money managers, or just unsophisticated. You may have someone else, family
member or friend, in whom you trust to judiciously invest the funds and to spend it wisely.
Trustee Controls the Money. You have created a living trust to hold property so as to avoid court process in the event of death or disability, to save on taxes and to provide lifetime asset protection for your children. You have named Susan Surefoot, a CPA and financial wizard, as the successor trustee of your trust after you are gone. Surefoot will administer, invest and distribute the funds for your children if you and your spouse die while they are minors. Your sister Ellen will be the guardian. How does Ellen receive money from Surefoot to take care of your children?
Jackson Mother vs. Jackson Attorney. This issue is currently in contention in the Michael Jackson case. The court has given custody of Michael Jackson’s three children to his mother, Katherine Jackson. Reports are that Katherine Jackson is financially stressed, was financially dependant on Michael Jackson and has been living on her social security since his death. She requested the court to provide her a family allowance and copies of Jackson’s proposed concert tour contracts and challenged the appointment of a Jackson business advisor and an attorney as the executors of Jackson’s estate. The court grated a temporary allowance to Katherine but left the executors appointed by the will in charge of the estate until further hearings. This is an example of how the guardian may challenge the authority of the executors over the administration of the estate.
A Soap Opera. Allen had an affair with Angelina, a rock band groupie. Angelina, deciding Allen was too dull, left him and followed her favorite alternative band, the Dead Toads, around the world. Later, Angelina said she was pregnant with Allen’s child, to be named Toadie Patty. Angelina became a drug addict and abandoned Toadie at birth. Allen picked up Toadie at a hospital in Kathmandu, Nepal and raised him as his son. Later, Allen met Rachel, they fell in love, got married and had two children of their own, Erica and Eric. They became a loving and blended family, with Erica, Eric and Toadie all behaving as part of the same family.
Guardian vs. Trustee. Allen and Rachel designated Mary, Allen’s sister,
who is successfully raising her own three children with her husband, a leader of a Mega Church in McLean, Virginia. But, reports are that Angelina has gone through drug rehabilitation twice and became a convert to a new age religion. Allen and Rachel may never be able to defeat a claim for custody by Angelina, the birth mother, but want to make sure that Allen’s brother, Aaron, a successfully financial planner, will handle the administration and investment of the funds of the estate of Allen and Rachel in case Angelina wins custody of Toadie.
How will Allen and Rachel navigate these stormy waters?
1. Put responsible people in charge of the money. Aaron will be the successor trustee of the Allen and Rachel trust and therefore have control of the money. Without pursuing a difficult and expensive law suit, the court will not have automatic jurisdiction over Aaron, as the court does with a will, and substantial proof of mismanagement will have to be clearly established for the court to remove Aaron or interfere with Aaron’s management of the trust assets.
2. Have the Trustee pay the bills. The trust gives the power of Aaron to pay the bills directly for the care, education, health needs, clothes and other expenses of Toadie. Angelina can not siphon off the funds to buy drugs.
3. Establish an allowance. Set forth in the trust how much is to go to Angelina directly to spend on Toadie.
4. Have the trust own the house. The trust can buy a house for Toadie and Angelina to live in and it is owned by the trust and not Angelina.
5. Fund monitoring of care. Authorize the trustee to use trust funds to find out how well Angelina is taking care of Toadie and to take court action to remove her as guardian if she is abusive to Toadie.
6. Allow discretion. Angelina may become a great mother, having learned from her mistakes. Give discretion to Aaron to help Angelina with her expenses of bringing up Toadie.
7. Alternative Rules. Provide an alternative set of rules if Angelina is not awarded custody of Toadie and Toadie stays with Erica and Eric and is raised by Mary and her husband.
Blended families. This choice has become more difficult now that many families are raising children from a prior affair, from a prior marriage or from their own children. The ex-lover is gone and may have little to do with the children of the blended family. But, if both spouses die, the surviving birth parent will have a priority claim for custody of the children. We discussed the planning options in a recent blog as to how to deter an irresponsible birth parent from obtaining legal custody in: “Who Will Take Care of Your Children If You Can Not?”
Guardian Does Not Control the Money. A touchy problem is who will control the money for the children. There is no legal requirement that the person in charge of your money (trustee or executor) be the same person who has custody of your children. The guardian may be a wonderful care giver – an ideal stay at home mom with a helpful and supportive husband – but they may be lousy money managers, or just unsophisticated. You may have someone else, family
member or friend, in whom you trust to judiciously invest the funds and to spend it wisely.Trustee Controls the Money. You have created a living trust to hold property so as to avoid court process in the event of death or disability, to save on taxes and to provide lifetime asset protection for your children. You have named Susan Surefoot, a CPA and financial wizard, as the successor trustee of your trust after you are gone. Surefoot will administer, invest and distribute the funds for your children if you and your spouse die while they are minors. Your sister Ellen will be the guardian. How does Ellen receive money from Surefoot to take care of your children?
Jackson Mother vs. Jackson Attorney. This issue is currently in contention in the Michael Jackson case. The court has given custody of Michael Jackson’s three children to his mother, Katherine Jackson. Reports are that Katherine Jackson is financially stressed, was financially dependant on Michael Jackson and has been living on her social security since his death. She requested the court to provide her a family allowance and copies of Jackson’s proposed concert tour contracts and challenged the appointment of a Jackson business advisor and an attorney as the executors of Jackson’s estate. The court grated a temporary allowance to Katherine but left the executors appointed by the will in charge of the estate until further hearings. This is an example of how the guardian may challenge the authority of the executors over the administration of the estate.
A Soap Opera. Allen had an affair with Angelina, a rock band groupie. Angelina, deciding Allen was too dull, left him and followed her favorite alternative band, the Dead Toads, around the world. Later, Angelina said she was pregnant with Allen’s child, to be named Toadie Patty. Angelina became a drug addict and abandoned Toadie at birth. Allen picked up Toadie at a hospital in Kathmandu, Nepal and raised him as his son. Later, Allen met Rachel, they fell in love, got married and had two children of their own, Erica and Eric. They became a loving and blended family, with Erica, Eric and Toadie all behaving as part of the same family.
Guardian vs. Trustee. Allen and Rachel designated Mary, Allen’s sister,
who is successfully raising her own three children with her husband, a leader of a Mega Church in McLean, Virginia. But, reports are that Angelina has gone through drug rehabilitation twice and became a convert to a new age religion. Allen and Rachel may never be able to defeat a claim for custody by Angelina, the birth mother, but want to make sure that Allen’s brother, Aaron, a successfully financial planner, will handle the administration and investment of the funds of the estate of Allen and Rachel in case Angelina wins custody of Toadie.How will Allen and Rachel navigate these stormy waters?
1. Put responsible people in charge of the money. Aaron will be the successor trustee of the Allen and Rachel trust and therefore have control of the money. Without pursuing a difficult and expensive law suit, the court will not have automatic jurisdiction over Aaron, as the court does with a will, and substantial proof of mismanagement will have to be clearly established for the court to remove Aaron or interfere with Aaron’s management of the trust assets.
2. Have the Trustee pay the bills. The trust gives the power of Aaron to pay the bills directly for the care, education, health needs, clothes and other expenses of Toadie. Angelina can not siphon off the funds to buy drugs.
3. Establish an allowance. Set forth in the trust how much is to go to Angelina directly to spend on Toadie.
4. Have the trust own the house. The trust can buy a house for Toadie and Angelina to live in and it is owned by the trust and not Angelina.
5. Fund monitoring of care. Authorize the trustee to use trust funds to find out how well Angelina is taking care of Toadie and to take court action to remove her as guardian if she is abusive to Toadie.
6. Allow discretion. Angelina may become a great mother, having learned from her mistakes. Give discretion to Aaron to help Angelina with her expenses of bringing up Toadie.
7. Alternative Rules. Provide an alternative set of rules if Angelina is not awarded custody of Toadie and Toadie stays with Erica and Eric and is raised by Mary and her husband.
8. Trust Protectors. Provide a committee of family members who are “Trust Protectors”, with the sole power to remove the trustee and appoint a replacement. You never know: Aaron may abandon his job as a financial planner to follow his passion for cooking after he wins the contest as the Next Food Network Star.
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