When you're creating an estate plan for clients with minor children, there are typically two unique considerations: 

• The appointing of a guardian
• Structuring the estate plan to provide for your client's kids 

Appointing a guardian

If your client has young children, appointing a legal guardian for them should be a key part of their estate plan.

A legal guardian is responsible for a child's upbringing should your client pass away before their children turn 18.

Legal guardians can be appointed in your client's will.

It's important that your client chooses a suitable guardian

Ticking the legal boxes is one thing, but there’s a lot of other things for your clients to take into account when naming a legal guardian. They should think about the guardian's:

• Age and energy: Raising kids isn't easy. A suitable guardian should be physically and emotionally up to the job.

Your client should also consider the person's age. If they choose someone older than themselves — their parents, for example — there’s always the possibility they’ll die before your client does, in which case the will should be updated to name new guardians.

Willingness is also important. Even if they agree to be a legal guardian when your client's will is created, the named guardian doesn't have to take on the responsibility if the time comes.

• Lifestyle: The guardian's lifestyle should fit with the way your client wants their children to be raised.

For example, if they travel a lot, for long periods of time, how would the children be looked after while they’re away?

Or maybe they have kids of their own? How would your client's children fit into that set-up?

• Values and “parenting” style: Your client can use their will to express their wishes for their child’s upbringing — where they live, what kind of education they’ll have, and so on. But some aspects of parenting are a little more abstract and harder to pin down.

Your client and the legal guardian should share similar “parenting values”. How do they believe children should be brought up? How strict is their approach to parenting? How would they want their children to be taught about the importance of money, and how early is too early to give children responsibilities?

It’s impossible to address all these sorts of questions, but your client should have a sense of whether someone broadly shares your values and approach.

By asking the right questions, you can help your client understand some of these values.

• Location: Although some states require a child’s legal guardian to live in the same state, most don’t. Would your client be comfortable with the idea of their children moving to a different state?

And if they stayed in the same state, does the named legal guardian live far away enough that your client's children would have to change schools?

Many probate courts will take a legal guardian’s location into account when deciding whether to approve the person nominated in your client's will.

• Finances: It’s expensive to raise children. Would the person named as legal guardian in your client's will have the financial stability to fund their children’s upbringing?

You can structure your client's estate plan to support their children financially, but it’s always good to know that, if your client were to die, their kids’ legal guardian would be able to afford to raise them.

Your client can name multiple legal guardians in their will. That way, if their first-choice is unable or unwilling to become a guardian, there are additional options.

Legal guardianship requirements by state

Many aspects of estate planning vary between states, and legal guardianship is no exception.

In most states, legal guardians simply have to be over 18 and of sound mind. But some states impose extra requirements.

If there’s no will, the legal guardian is chosen by the probate court.

If your client dies without a will, the courts will usually appoint a legal guardian. If the child is over 14, they can, in most states, request a legal guardian.

Your client needs to decide if their legal guardian has control of assets

For those assets that are distributed according to your client's will — rather than a trust — your client needs to decide if the legal guardian they name will have full control of those assets. If not, your client should appoint a guardian of the estate.

Both approaches have pros and cons. Giving the legal guardian full control of the child's assets means less oversight, but appointing a separate guardian of the estate demands full cooperation between them and the legal guardian.

Custody of your client's child (or children) automatically passes to the other living parent, if there is one

Even if your client has sole custody of any children, custody will automatically pass to the other parent — if there is one — regardless of any legal guardians named in the will.

The exception here is if the other parent isn't of sound mind to look after them. If your client believes this is the case, it's worth explaining why in the client's will.

Structuring your client's estate plan

The documents you create as part of your client’s estate plan may be a little different for clients with minor children.

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Here are some key provisions to consider.

1. Create a will

The first step in estate planning for clients with minor children is to create a will — the legal document that outlines how assets are distributed after death.

A will can also appoint a guardian for the children in the event that both parents pass away. As well as appointing a guardian, the will can make provisions for funding the guardianship — but in some cases this is best done via a trust.

If a client with minors dies without a will, a court will decide how assets are distributed and who will be responsible for the children's care.

2. Establish a trust

A trust is a legal arrangement that allows assets to be managed by a trustee on behalf of a beneficiary.

Trusts are often particularly useful for parents with minor children, because they allow your client to stipulate how those assets are to be used. For example, your client can specify an investment strategy for the assets, or stipulate that the funds be used only for the child's education, or that the funds should be distributed incrementally.

Another advantage of creating a trust is that any assets your client puts in that trust don't have to go through probate.

3. Consider life insurance

Life insurance can be an important part of estate planning for clients with minors. A life insurance policy can provide financial security for the children in the event of the client's death. This can help cover expenses such as education, living expenses, and other costs associated with raising children.

4. Designate beneficiaries

Beneficiary designations allow your client to leave specific financial instruments to specific beneficiaries.

There are two kinds of beneficiary designation: “transfer-on-death (TOD)” — which applies to things like stocks and bonds — and “payable-on-death (POD)” — which applies to things like bank accounts.

Like trusts, beneficiary designations help your client’s assets avoid probate.

Your client can specify a beneficiary for lots of different assets, including:

• Life insurance policies
• Bank accounts
• Investment accounts
• Retirement plans

5. Review and update the plan

It's important to review and update the estate plan regularly. This can include updating the will, reviewing the trust, and ensuring that the guardian named in the plan is still the best person for the job. Circumstances can change over time, and it's important to ensure that the estate plan reflects the client's current wishes.

6. Consider a power of attorney for minor children

In the event that both parents are incapacitated or unable to care for their children, a power of attorney can be a valuable estate planning tool.

This legal document allows parents to appoint an individual to make decisions for their children in their absence. Clients should choose someone they trust and who is willing to take on this responsibility.

Estate planning for clients with minors is an important process that can help ensure the financial security and well-being of children in the event of the client's death. By following these tips, clients can create a comprehensive and effective estate plan that meets their needs and protects their loved ones.

Account for blended families

Blended families are increasingly common, especially among millennial clients. Blended families often include children from previous relationships, which can create complexities in estate planning.

Those clients with blended families should carefully consider how they want to distribute their estate between their biological and non-biological children. These wishes can be reflected in your client's will. Trusts can also be a useful provision here.

Financial advisors should work with clients to ensure their estate plan meets their goals.

Build your client’s estate plans with Snug

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