Question: Should the same person who is raising my children also be in charge of the financial assets?
Answer: Just because a person is the nurturing type, does not mean he or she is best at handling money. While the person you name as guardian of your children can also serve as trustee of your children’s trusts, that may not be the ideal solution or the best candidate. Serving in the dual role of guardian and trustee presents the potential for a conflict of interest. The temptation for a trustee to ‘blur the lines’ between the children’s necessary expenses and the guardian’s personal expenses is present.
This can be avoided when you appoint one person to raise the children and another to manage the finances. When the guardian needs funds to help take care of the children, he or she simply reaches out to the trustee and justifies the need. Since the trustee has a discretion in these matters, it’s important to give clear guidance to the trustee so that the children are cared for in the way you want them to be. However, it is not always necessary to be specific. In fact, most of the time, we rely on having faith that the people chosen for the roles will exercise good judgment.
That being said, at times it doesn’t hurt to give specific instructions. For example: can the guardian use portions of the funds to benefit the guardian’s own children; can the money from the trust be used to take the whole family (including the guardian’s children) on a vacation; can the guardian request funds from the trust to pay for private school?
Comment: I believe the most important decision is to pick high quality people for the roles. Even with the most specific instruction written into the legal document, the document can’t cover or foresee every situation that could arise.
As always, if you have any questions or would like to learn more, please contact Steve Shane at firstname.lastname@example.org or .
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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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