Sara Hankins made sad headlines recently. The Illinois mother of four was diagnosed last year with Lou Gehrig’s Disease, and lost her life on March 13, 2017. She was just 36. Her primary concern during her last months was not herself, but her children. Who would care for them?
If you have young children, planning for your death or incapacity is probably the last thing on your mind. You are busy thinking about the good things ahead, carpooling, helping with homework, coaching soccer. But as Sara Hankins’ story shows us, life can be unpredictable. And while she had several months to plan for her children’s future, tragedy sometimes strikes without warning, on the highway or as a result of some medical catastrophe. As a loving parent of a minor, it is important to make plans so that your child is protected, no matter what the future holds.
Many parents with minor children are short on financial resources. However, you need not be wealthy to put a plan in place, nor does it need to be overly complicated. Here are the key elements of a basic plan to protect your minor children.
Create a Health Care Surrogate for Your Child
Even when you are alive and well, your child may become ill when you are not available to talk with his/her doctors and decide on treatment. You could be out of town for work, for example. Or you might be ill or incapacitated. Florida Statute 765.2035 permits you to create a “Designation of a Health Care Surrogate of a Minor” authorizing someone you know and trust to make those decisions in your absence. You should name a back-up surrogate in the event your first choice cannot serve.
Frequently clients name several surrogates, giving any one of them the authorization to act. For example, your child may have two sets of grandparents or perhaps a number of other relatives who watch your child, and you would want any one of them to be able to make your child’s decisions if you are not available.
You should also be sure that your surrogate form contains a HIPAA release. This gives permission to your child’s medical providers to release confidential information to your authorized surrogates.
If there are two parents, both parents should execute the same instrument.
Your Last Will and Testament
Your will must conform to Florida law and be properly drafted and executed with all the formalities required by the state. I caution anyone against using pre-printed forms or online resources. These resources come with a warning denying liability for mistakes. See a competent estate planning attorney to make sure it’s done right. Your will should have certain elements that provide protections for your child, as noted below.
Name a “Guardian of the Person” for Your Child
If you pass away, The Florida Probate Court will choose a guardian for your child, based on what it decides is in your child’s best interest. But you can let the court know your preference for guardian by naming a “Guardian of the Person.” You can do this only one way: through a provision in your will. Your will must be properly drafted and executed according to Florida law. The Probate Court will generally honor your wishes, unless the guardian you have nominated appears grossly unfit or is unable to serve at that point in time.
There are many issues to consider when deciding on a guardian. Although grandparents may seem the logical choice, their age and ability to handle the physical and mental challenges of raising children must be considered. A prospective guardian’s moral and religious views may be important to you, as well as where the potential guardian resides, in order to minimize any further disruption to your child’s life. Find out if the person you wish to name actually wants the job, and be sure to name backup guardians in the event your first choice cannot serve.
If there are two parents, each should have his or her own will, obviously naming the other as guardian. Each parent should also include back-up guardians in his/her will, in the event both parents are deceased. It’s best if the parents name the same successor guardian(s).
Name a “Trustee of the Property” for Your Child
Your will should also have a provision naming a “Trustee of the Property” for your child. The trustee will manage your child’s inheritance for your child’s benefit, until the age at which you authorize your child to receive the funds.
If you fail to designate a trustee, the Probate Court will appoint a Guardian of the Child’s Property. Then the child will receive his/her money upon reaching majority age. Most parents do not want their children to receive their inheritance at 18 or 21, preferring instead a somewhat later age, when the child may be more fiscally responsible. Naming a trustee allows you to achieve that goal.
You should name backups in the event your designated trustee cannot serve. The trustee of the property may be the same individual you have named as guardian of the person, but need not be.
Having limited financial resources currently does not detract from the need for a trustee. If you pass away, there may be life insurance proceeds to be managed, or a lawsuit related to your death or incapacity may cause a large sum to flow into your estate.
More Then One Child? Create a Common Pot Trust
If you have more than one child, we usually recommend adding a clause in your will that requires the creation of a Common Pot Trust upon the death of the parents.
If there are two parents, each should have his/her own will containing this clause. The will usually indicates that the parents leave everything to each other, but if they both die, the estate will pass to the Common Pot Trust.
The Common Pot Trust will hold your children’s money. All the children will be beneficiaries, with your trustee having discretion over how the funds will be used, based on each child’s unfolding needs. This is what we do as parents: we strive to give each child what he/she needs and do not keep a ledger to equalize expenditures. For example, one child may require expensive orthodontics and another may not. One child may be a straight A student and another may need tutoring to keep up. One child may get a scholarship for college and another may need parental help for tuition. The trustee of the Common Pot Trust should have the same latitude as you have to use the funds as he/she sees fit, without having to make things “equal.”
Usually, the trust will contain language directing the trustee to terminate the trust when the youngest child attains a given age. At that time, the trustee will divide any remaining funds equally among your children.
Review Your Beneficiary Designations
When you have children, it’s time to review your beneficiary designations. If you are married, your spouse may be the death beneficiary. If not, it will probably be your children, or they will be the contingent beneficiaries if your spouse predeceases you. Items to look at include your IRA, 401K, bank account, brokerage accounts, and of course, life insurance policies.
If your children are minors, do not name them as beneficiaries. If you do, the court will create a guardianship for them and select a guardian to hold the money they have inherited. By law, your child will receive the funds when he reaches majority age, and many children are too immature at that point to prudently handle a lump sum of money. It is preferable to require any money your child receives through a beneficiary designation to be managed by the Trustee of the Property you have named in your will.
And for You, the Parents
Who will handle YOUR affairs if you become incapacitated? Who will continue to pay your bills, or make your medical decisions? Every adult, parent or not, should have:
- A Durable Power of Attorney: This allows you to name someone who can handle your finances should you be unable to do so yourself. You should also name backups.
- A Health Care Surrogate: This is like the Durable Power of Attorney, but the person named is authorized to make your health care decisions. You should also designate backups in case your named surrogate cannot serve. Also be sure that the document contains a HIPAA release so that your surrogate can get confidential information from your medical providers, pharmacies, health insurance company, etc.
Parents can derive great peace of mind by putting these plans in order. You will know that if life takes an unwelcome turn, you have a Plan B that protects your children now and in the future.