Planning for minor children is one of the concerns that causes many young families to think about estate planning. When creating an estate plan, thinking carefully about who would raise minor children, who would manage the money, at what age the children would take control of inherited assets, or how the pieces interact are important considerations. The questions of guardianship and asset management are distinct, and the best answer to one is not always the best answer to the other. A plan that addresses both, and coordinates them, is the one that works when it is needed.
Nominating a Guardian in the Will
Under Massachusetts law, a parent may nominate a guardian for a minor child in a will or in another signed writing attested by at least two witnesses. If a minor child’s parents pass away, the nominee must typically petition the Probate and Family Court for confirmation of the appointment. A nominee appointed by the deceased parents generally has priority over other proposed guardians.
Both parents should make the nomination. If only one parent nominates and the other parent survives, the nomination is largely moot because the surviving parent generally has priority. If both parents die in a common event or in close succession, consistent nominations in both wills prevent disputes. Inconsistent nominations can lead to litigation.
Practical considerations for choosing a guardian go beyond legal drafting. Age, geography, religious values, parenting style, the nominee’s own family situation, and whether the nominee has been asked (and has said yes) all matter.
Why Guardian of the Person and Guardian of the Property Are Different
A guardian of the person is responsible for the child’s daily care, including where the child lives, goes to school, receives medical care, and how the child is raised. This role is different from the guardian of the property, responsible for managing money and property held for the benefit of the child.
These roles can be held by the same person or by different people. The person best suited to raise the child may not always be the person best suited to manage significant assets. On the other hand, sometimes it makes sense for them to be the same, as the guardian of the child will be in tune with the child’s financial needs.
Estate plans often separate the personal and financial roles by naming a guardian in the will and then directing inherited assets into a trust managed by a trustee. The practical effect is a split role: the guardian raises the child, the trustee manages the money, and requests for distributions flow from the guardian to the trustee. Even if the guardian and trustee are the same person, it still often makes sense to use trusts when planning around minor children.
Trust Planning for Minors
When parents pass away and leave assets to a minor child through a will, the assets will be distributed to the child outright upon turning 18, regardless of whether the young adult is ready to manage substantial assets. This is not always an ideal outcome, as many young adults would benefit from more financial oversight at a young age.
The standard solution is to set up a trust to hold the inherited assets for benefit of the minors. The trustee would manage the funds and make distributions to the beneficiary as they deem advisable for health, education, maintenance, and support. The trust can state an age such as 25 or 30 when the beneficiary would be permitted to control the assets on their own.
Trusts may also provide creditor protection for beneficiaries. If assets come down to a beneficiary through trust rather than outright, assets held in the trust receive protections from the beneficiary’s creditors, such as divorcing spouses or lawsuits.
UTMA as a Fallback
The Massachusetts Uniform Transfers to Minors Act (MGL c. 201A) allows property to be transferred to a custodian for the benefit of a minor, sometimes past the age of majority. Under the UTMA, the custodian holds and manages the property until the minor reaches the age specified at the time of the transfer, which in Massachusetts can be set as late as age 21.
UTMA accounts are useful for small dollar amounts, specific gifts from grandparents, or situations where a full trust structure is not necessary. UTMA accounts are less useful for larger inheritances because the custodianship terminates at the specified age, and the beneficiary then has unrestricted control. For substantial assets, a trust that extends past age 21 is usually a better fit.
Planning Ahead
Planning for minor children is vital in a properly drafted estate plan. An intestate estate leaves the guardianship decision to a court with no parental input, turns inherited assets over to the child at age 18, and offers no trust structure at all. Families in Massachusetts with young children can benefit from a plan that coordinates guardianship nominations and trust structures, to maximize the wellbeing and financial security of the child long term. The conversation about who would raise the children and who would manage the money is often the hardest, but most important when planning around minor children.