3 Key Considerations for Being Guardian in a Trust

A woman who agreed to be a guardian in a trust sits with a child on her lap.

(Image credit: Getty Images)

While it’s an honor to be asked to be the guardian of someone else’s children in the event of a tragedy, there are three key considerations before agreeing to be named guardian in estate documents.

Is It OK to Rule From the Grave?

My good friends, parents of two young daughters, recently went through the estate planning process wherein they created a family trust, wills and powers of attorney for financial affairs and health care. In that process, their attorney highlighted the importance of naming a guardian for their children in the case that both parents were to pass away before the children reached the age of 18.

For many parents, this is one of the most carefully considered and sometimes emotional decisions to be made. I often hear from my clients that they assume that a family member will step in, but there are many important things to consider before selecting a guardian.

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My friends naturally thought first about their close family members as possible guardians. Grandparents were considered, but depending on the age of grandparents and their health, it may not be reasonable for a grandparent to take on the responsibility of caring for a child for potentially a decade or more. Additionally, if grandparents have downsized to a smaller home or moved to a 55-and-over community, there may not be living space for additional people in their home, or their community may not allow minor children as permanent residents.

Next Up: Siblings Considered as Guardians in a Trust

Next, they considered their own siblings. A beloved aunt or uncle may be willing to be a guardian if needed, but you need to consider if they have their own families with children, and how much of a caregiving burden adding more children to the mix could be. You might also not agree with parenting styles or values that you want your children to be raised with. These same concerns may also apply to other extended family members you might consider.

In the end, my friends decided that they would be most comfortable asking me if I would be a guardian for their children if they passed away prematurely, saying that they felt comfortable that my role as honorary “auntie” to their children means that I love their kids and that I would be able to raise their children in the way they would hope. It was a huge honor to be asked. I told them I would think about it carefully and would probably have some questions.

Over the next week, I did think of important details that I needed to know before I could agree. Loving the kids was never a doubt, but the practicalities of possibly raising someone else’s children in what would most certainly be a tragic situation needed to be addressed.

If you are asked to be named a guardian in a family’s estate documents, here are some things to consider:

Financial considerations. If the parents were to pass away, are there enough assets to be able to raise the children to adulthood, or would you be expected to be able to pay for their needs? Do the parents have life insurance that they are expecting to provide the money needed? If so, how much?

What other assets would be available to care for the children? Would you be responsible for managing them, or are there other professionals involved? Are college savings funds already started for the children?

Even if you are willing to take on the physical and emotional care of children, you need to know if you will also be providing financial care of them as well.

Legal arrangements. Is there a family trust? If so, who is the successor trustee of the trust? What are the terms of the trust related to uses of the assets? The most common revocable living trusts allow for the “health, education, maintenance and support” of the beneficiaries, but there can be age conditions for the funds, or certain funds may only be available after life milestones, like education, employment or marriage, are met, which would be helpful to know.

Lifestyle choices. Understanding how the parents hope their children will be raised is important for a guardian to know. Do the parents expect that their children will still be living in the same community or even the same home as they are now? Will they want their children to continue at the same school, attend the same religious institutions or stay in the same neighborhood?

I have seen trust terms that specify that funds are available for the family home to be paid off and maintained because the guardian is required to move into the family home so as to not further disrupt the children’s previous lifestyle. There is nothing wrong with that arrangement, provided the guardian knows and agrees with that expectation.

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Even inquiries about hobbies and activities are an important discussion point – do the parents feel strongly that their children will play a certain sport or absolutely do not want their kids to do an activity, and do they have written guidelines around what is “allowed” by the trust? An example that I have seen is a restriction on paying for certain sports participation due to worries about concussions – the trust could pay for any fees related to low-impact sports but specifically prohibited paying for contact sports.

If any of these types of lifestyle expectations would create problems for the guardian, it is best to discuss what the parents are willing to adjust, and if that’s not possible, you can decline being the guardian.

Being asked to be a guardian for children, knowing that your family member or friend has the confidence that you would raise their children well in their absence, is an enormous compliment. And most people may be inclined to casually agree, out of love for the children involved, but in the rare event this actually happens, it is imperative that you are realistic about what is being asked and the responsibility you are agreeing to take on.

I Said Yes to Being Named Guardian in Estate Planning Documents

In my case, the parents and I had a substantial discussion about the plans they had made for their children and what they would expect me to do if needed. I did say yes to being named as guardian in their estate planning documents, confident that not only do I love their children, but I would also be reasonably able to fulfill the hopes and expectations of the parents if needed.

5 Common Estate Planning Mistakes to Avoid

In cases where a guardian is needed, simply loving the child is not enough, and good planning and communication can ease a difficult situation.

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Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors is registered as an investment adviser with the SEC. Content is for educational and illustrative purposes only and does not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. The information is believed to be accurate, but is not guaranteed or warranted by Mercer Advisors.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Kara Duckworth is the Managing Director of Client Experience at Mercer Advisors and also leads the company’s InvestHERs program, focused on providing financial planning to serve the specific needs of women. She is a CERTIFIED FINANCIAL PLANNER and Certified Divorce Financial Analyst®. She is a frequent public speaker on financial planning topics and has been quoted in numerous industry publications.