Question: Should the same person who is raising my children also be in charge of the financial assets left in trust for them?
Answer: The person you name as guardian of your minor children can also serve as trustee of the child’s trust. That being said, often the people who are the best suited to be guardian are not the best at handling money.
Of course naming the same person as both guardian and trustee could put the individual in a difficult predicament. It could be tempting for the guardian to use the children’s trust money for the guardian’s own needs (e.g., new car, house addition).
Appointing a different person as guardian and trustee would solve this particular problem. When two different individuals are serving in the dual roles, there are arguably more checks and balances. In that case, the guardian would simply contact the trustee and explain the needs of the child.
Since the trustee is able to exercise discretion in these matters, it becomes important to give clear guidance to the trustee so that the children are cared for in the way you want them to be. You might even consider leaving specific instructions to the trustee, such as:
- Can my guardian buy a new car to accommodate a bigger family?
- Can my guardian expand the size of their current house?
- Can my guardian use funds in the trust to pay for private school?
- Can my guardian use funds in the trust to take the whole family on vacation (including the guardian’s own children perhaps).
Comment: While the guardian is typically a family member or close friend, there are more choices when it comes to naming a Trustee, including professional advisors and corporate Trustees.
As always, if you have any questions or would like to learn more, please let me know.
ABOUT STEVE SHANE
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.
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