savings

Protect Your Most Precious Assets

Make sure you draw up a will and name a guardian for your children just in case the unthinkable happens.

Many parents put off writing a will because they see it as a downer -- a way to dispose of your assets after death. Think of it instead as a way to protect your most precious assets -- your children -- if something should happen to you and your spouse while the kids are minors.

That point was driven home by the tragic death of Dana Reeve, leaving her 13-year-old son, Will, an orphan. A spokesman for the Christopher Reeve Foundation assured the media that Will is in the "loving care of family and friends." Presumably Will's parents also set up financial and legal safeguards to care for their son.

Good-hearted and well-intentioned as familial love may be, parents should never rely solely on informal guardianship arrangements. Asking your sister, for example, to take care of your children doesn't have the legal standing of a formal guardianship.

If both parents should die without naming a legal guardian, the courts will decide who's going to bring up your kids. A judge could choose the one relative you wouldn't want, and court costs could eat up your kids' assets.

That's why it's so important to draft a will and name a guardian. To choose this all-important person, follow a few simple rules:

  • Look to your generation. Many older people lack the stamina or the desire to start child-rearing all over again.

  • Name one guardian, not two. Choosing a couple might seem natural, but things could get complicated if the couple splits up.

  • Consult the prospective guardian. Don't assume the person you have in mind is prepared to accept the job. If your children are old enough to understand, tell them your plans.

And don't be shy about leaving a letter or recording in which you give detailed instructions about how you want your children to be brought up.

You may even want to name two separate guardians: a guardian of the person to take care of your child, and a guardian of the property to manage your child's finances.

If your children would inherit substantial assets -- from an insurance policy, for example -- you could use your will to set up testamentary trusts to hold those assets for the kids' benefit after your death. You can name the trustee, and give any insructions you wish about how the money should be used and at what age the kids should get access to it. See Five Ways to Prepare for the Unthinkable for more information.

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