Naming a Guardian for Your Minor Children

Most people put off estate planning because they do not think they have enough to justify it. Parents of young children have the opposite problem. The asset that matters most is not an asset at all, and the document is not really about money.

The nomination and what it is worth

Both Texas and Illinois let a parent nominate a guardian for a minor child, usually in the will, and both give that nomination substantial weight. It is not binding in the strict sense, because a court retains authority to act in the child’s best interest and will not appoint someone unsuitable. But in the ordinary case, where the nominee is willing and fit and no one objects, courts follow the parent’s choice.

Without a nomination, the court chooses from whoever comes forward. That is how the decision ends up being made by whichever relative filed first, or by whichever branch of the family had the resources to litigate.

The distinction most parents miss

There are two guardianships, and they do not have to be the same person. Guardianship of the person covers where the child lives and how the child is raised. Guardianship of the estate covers the child’s money.

Splitting them is often the right answer. The sister who is the loving choice to raise your children may be a poor choice to manage a life insurance payout for fifteen years. Naming a different person, or better yet avoiding the estate guardianship entirely, is a legitimate and unremarkable decision.

The money problem nobody plans for

This is the part that surprises people. If a minor inherits outright, whether by will, by intestacy, or by a beneficiary designation naming the child directly, the money generally has to be managed under court supervision, with accountings, bonding, and restrictions, until the child turns eighteen. Then it is handed over in full, on a birthday, to a person who was in high school a few months earlier.

Life insurance is the usual culprit. A policy naming a minor child as beneficiary creates precisely this outcome.

The fix is to give the money somewhere better to go. A trust for the child’s benefit, created in the will or as a standalone trust, with a trustee you choose, distribution ages you choose, and no court supervision, solves the whole problem at once. Custodial accounts under each state’s transfers to minors act are a lighter option for smaller amounts, though they also end at a fixed age.

Practical points

Name alternates, ask the people first, and choose on geography, age, and household stability rather than seniority. Then make sure your beneficiary designations point at the trust rather than at the child.

This week: Pick a first choice and two alternates, and ask all three. Then check every life insurance policy and retirement account to see whether a minor child is named directly as beneficiary. If so, that needs to point at a trust instead.

If you have young children and no guardian nomination, that is the single most important document you do not have. Call or text 512.761.8479.