Help with our Wills...

In My Humble Opinion
1

My wife and I are writing our wills. We have a 3 year old daughter. We have selected her guardian and alternate guardian.

We’re stuck on what is “fair” in terms of providing her guardians with money for her care.

The estate is relatively small, our house and two life insurance policies, and some small investments. It would probably total just over $2,000,000.

Our financial advisor gave us his opinion, our lawyer gave us hers, but neither piece of advice seems fair to us (one is too generous to the guardians, and one is not generous enough).

We’re wondering what other Doper parents have decided to do in terms of financial compensation for their child(ren)'s guardians and appreciate any help/advice.

MtM

2

IMHO, if someone agrees to raise your child for you after your death, you should compensate with any amount that is available. College, when she needs it, will be well over $200,000. I doubt if there is any circumstance short of outright negligence in which they will come out in profit over the next 13 years of caring for your child. Don’t forget the therapy bills.

However, I would make sure the child stands to inherit independently on reaching the age of majority (or some age that you would specify).

What is “fair” well only you know that for sure. Will will does not have to be “fair” only manifest your wishes. However, since you asked I would divide the estate 1/2 to the guardians and 1/2 to the child, assuming there are no other dependents.

3

I assume you’ve spoken to the guardians about the responsibility.
Why not ask them what they think is fair?

4

The standard language in ours includes access to the estate for the support and education of a child. I assume you are asking about compensation to the guardian beyond that.

We had my brother as guardian, and didn’t write in any additional compensation, because of the blood ties. Our kids are now adults, so it doesn’t matter any more. If the guardian is a relative, I’d hope that a whole bunch of additional compensation would be necessary, so long as support for the kids is adequate so that they aren’t a burden.

Who maintains your estate in your will? Do you have a trust? Making sure there is still money is pretty important also.

5

I am McDeath’s wife.

Our primary guardians are McDeath’s sister & her husband. Presently their house is quite small and their primary vehicle is a pick-up truck. They have one baby and are planning to have another soon. A pick up truck will not work for a family of five, and neither will their house.

Our initial thought was to leave them our house. They could sell it and easily use the proceeds for a house adddition or upgrade, and a new vehicle and the remainder for the extra costs associated with raising a child.

Then the life insurance, investments etc would be held in trust for our daughter. The trust would be administered by our executors, NOT her guardians. She would get a vehicle, her post-secondary education & associated living expenses paid for from the estate, and get half at 25 and the remainder at 30 (or something like that).

If there were outstanding or unexpected expenses, the guardians could apply to our executors for additional funds and it would be up to our executors’ discretion.

It made sense to us, but then we started second-guessing it. Our lawyer thinks it is overly generous to leave the guardians our house. (Our house is not fancy and the equity in it would probably be around $100,000 if we were to die tomorrow). Our financial advisor thinks it would not be enough and we should give the guardians money each year (or each month) in order to prevent resentment towards our daughter.

So now we’re wondering if we should just lump the house in with the rest of the “estate”, and give the guardians an annual “allowance” of a certain amount ($10,000? $15,000?) to use for our daughter’s food, clothing, shelter, etc.

6

Interesting dilemma.

When we named guardians for our two, the housing and car wasn’t a big issue (the primary and the alternate guardians both have big enough houses and cars, and neither was planning any additions to the family).

I actually think the idea of giving the sib the house equity is a reasonable one, though perhaps in the context of “distributed by the executor as part of the purchase price of a larger house”. Not sure how that would work out tax-wise, as it would be an inheritance, albeit with strings attached. Possibly, if you set up living trusts, they could be written that way. Then they’d get to keep that 100,000 by way of having that equity in their larger home.

Obviously straightforward directly-kid-related expenses (clothing, additional money for food, an allowance for stuff like dance lessons, etc.) would come directly from the trust. Either as an annual / monthly allowance, or the family could request money from the trustee after the event (or in anticipation of the event, if it was something that could be planned for). Food would probably need to be handled via an allowance paid to the family, you wouldn’t want the parents to have to send copies of grocery receipts to the trustee!!

An additional allowance to the guardians, to cover things like the ongoing expense of a slightly larger car, might be nice if the estate can swing it.

The guardians will surely not be expecting to make a profit, or be “paid”, for raising your child - as the financial adviser’s advice would seem to do - but it’s certainly worthwhile to make sure that they’re not harmed financially either. With an estate valued at 2M, that shouldn’t be an issue.

We didn’t address the details in our trusts - in our case, all money is left to trusts for the kids, which the trustee can disburse for whatever expenses he deems appropriate.

7

Is your house big enough for everyone to live in? If so, when your child is a bit older leaving the house would actual be helpful for her, since not moving would make her trauma a bit easier. If you would really leaver her $2 million (not a small amount) interest on that that would be plenty for living and education expenses for her. You have a better college deal in Canada than we do, right?

Having the executor be different from the guardian is an excellent idea. We have the trust division of a financial institution set up if needed, even now that the kids are over 21.

8

Jesus fuck! You’re leaving 2 mill and wondering if there will be enough to go around? I’d have serious second thoughts about my willingness to be guardian for my niece if the parents wanted to micromanage it so strictly.

My understanding was that guardians were willing to welcome children into their family where they would raise them as their own - I didn’t think of it as being done for profit.

Why don’t you just leave x amount of your estate in trust for your daughter, with the income available to the guardians for whatever purpose until your kid is 18 or 21? A million bucks invested incredibly conservatively in munis would give them $40k taxfree a year. And however they spend it, your kid will benefit. Meanwhile you have another million set aside for your kid to inherit at whatever age.

You sure don’t want a situation where your kid has tons of mad money, wears designer clothes and ges to private school, while their own kids are (relatively) impoverished. Or are you worried they will treat your kid like Cinderella, keeping her in a broomcloset while they jetted off on exotic vacations?

We agreed to act as guardians for our siblings’ kids (who are all now over 18). It never crossed our mind that our siblings were going to leave us any money in their wills in exchange.

And IMO - it is kinda whack to describe a $2 mill estate as “relatively small.”

9

MamaZappa - you make good points, thank you!

Dinsdale - ignoring the judgmental slant of your post, I’ll reply that I didn’t mean to imply that we thought there wouldn’t be enough $$ to go around. We’re just trying to make sure that our daughter’s future would be taken care of, and that her guardians are fairly compensated.

Voyager - her primary guardians live & work about 3 hours away so their moving into our home is not an option. Plus our home is just as small as theirs! :slight_smile:

We just want to do what is right. Our lawyer feels the entire estate should be intact for our daughter, for her to access for education, then at 25, then at 30. We don’t feel that is fair, and are trying to come up with an annual / semi annual / monthly amount for her guardians to both take care of her care and ensure that their quality of life is not adversely affected by her presence in their home.

As time goes on and we age, our life insurance amounts will have to decrease, as the premiums will get too high for us to comfortably manage, so that is another consideration. Currently yes, our combined life insurance is approx $2mill, but in a couple of years it will start to decrease, so it’s very feasible that in ten years, it might only be approx $1mill, so we have to keep that in mind too.

10

Honestly, I like your original plan.

I wouldn’t expect to be compensated if we ended up raising our neice, either. I think that I might even feel insulted by the suggestion. If I were raising a child for 15 years, she’d be part of the family, not a guest or an expense.

But with that plan you’re making sure that the family unit isn’t being negatively impacted by the sudden increase in their expenses, while still leaving a nest egg for your daughter. And money would be there for any additional emergencies.

If you really feel like you’re cheating them, I would earmark a yearly gift to the family as a whole… maybe $12,000? $18,000? Then you wouldn’t be paying them to care for her, but it would keep the financial burden way down, and possibly allow them to provide extras like family vacations.

My only concern is unless the tax situation is better the other way, I would have the estate sell the house, take care of the paperwork and taxes, and then give them the money. They probably don’t need the extra stress of dealing with any of that, and you seem certain that they won’t want the house itself.

11

We listed two people in our will (which really ought to be notarized, but that’s another story), one of two people to raise our kids and, actually, a third to dispense funds for that purpose.

I dunno if it’s a good idea or not, but it takes the whole ‘evil family member squandering the inheritance’ out of the picture.

12

Well, you asked for opinions, and that is what I gave you. It is your money - do with it whatever you wish. But the idea of doling out a specific allowance or salary to the guardians strikes me as offensive.

Whatever you decide, your kid is going to end up with a ton of cash. And whether she ends up with 1 mill or 2 at age 21 or 30, is isn’t going to make up for the loss of her parents.

My opinion is that you put all or some of the money in trust for your kid to access at whatever age you feel best, and give the guardians access to all or some of the income to use however they wish.

My personal opinion would be to not leave a specific inheritance to the guardians. Think of it this way - would you expect to leave your siblings/in-laws anything after your kid reaches majority?

As I said in my original response, I would hope your relatives are agreeing to do this out of love, not for profit.

13

Have you talked to the potential guardians and asked their thoughts? Personally, I think a quarterly stipend paid from the accrued earnings (with the balance to be re-invested.) Think of it as child support. If there is an extraordinary need (illness, Olympic-caliber gymnastics training when she becomes the next Nastia Luiken), they can apply to the trustee for access to more funds. Then the balance of the estate to be disbursed as your trust says. But make sure the guardians understand your plans when they agree to it.

StG

14

One quick note on that: Of course, in 10 years you wouldn’t need to have as much of an extra nest egg, as you’d need to provide support for fewer years, so a lower life insurance amount isn’t a bad thing. Plus presumably your net worth (home equity, whatever retirement investments you might have) would have increased - so it might well still be 2M in 10 years.

15

First of all, my children don’t get anything unless my husband has already died. Otherwise, hubby gets it all. I’d say “duh” except if you die intestate, you default to what the state dictates. (In Ohio, I think the spouse splits it with the kids 50/50.) In any event, we have a will and my spouse gets it all.

If he predeceases me, then everything goes into a trust. I’ve designated a Trustee and an alternate Trustee. I’ve designated a separate guardian and an alternate guardian as well. I’ve also designated a Financial planner who will decide who to invest the Trust.

The guardian is given full authority over the kids and the Trustee is given full authority of the money. In the will, the Trustee is given full authority to pay for the children’s education, housing, etc., out of the trust as long as they remain in school full time and maintain a “C” average. At the age of 23, they get 25% of the proceeds, which would be at a time when they would be (hopefully) buying their first home. At 27, the trust is dissolved.

As far as paying the Guardians:

"During any time that any of my children have a guardian, the Trustee is authorized to pay the guardian an annual stipend for his time each year as guardian, including to but not limited to lost wages incurred (which must be documented to the satisfaction of the Trustee), in a total amount not to exceed $25,000 per year to be determined and paid at such time(s) each year in the sole and absolute discretion of the Trustee.

I also typed up and notarized a separate document addressed to the Trustee, which outlined my philosophy about child rearing (which he should know since he’s my brother), telling him that my preference is for my children to be cared for, but sufficiently poor that they are motivated to finish school and pursue a career. I told him that down payments on houses were okay; down payments on BMW’s were not. “I don’t want my children to spend our life’s earnings on new cars which depreciate the second they drive them off the lot and $300 purses.”

I also said that my preference was for them to stay together in our home, if possible, and that the guardian and his/her family would be allowed to stay in our home, rent free, until the children finished school or reached the age of 27, whichever came first. If the guardian didn’t want to leave his/her home, then any children of majority age could remain in the family home, rent free, for as long as they remained in school and maintained a “C” average.

That’s what I did. Hope this helps.

16

I’m not sure about what kind of strings would be adequate, though. It may be a better solution for them to move into Dr. Death’s and Stainz’s house (may it never become something they need to think about) and sell the other one. If they want to do this, it will probably be best tax-wise to have the child be the house’s owner.

I’ve seen wills which, while they didn’t involve guardianship, established things like “if one of our descendants wants to keep our house, the amount they must pay to the rest will be calculated like this; if nobody does, or if they can’t make up their minds in less than this much time since the second one of us dies, they must sell the house and split the money like this.” It was both a way to keep the descendants off each other’s throats and to ensure that anything that ended up happening with the house was fair (or at least, that the split was similar whether they sold or kept).

17

It helps big-time - thank you for your detailed response!

18

Well, the “strings” (in what I was thinking) were just that they would not just get the money as a handout, but only as part of purchasing a house. After that the value would be theirs. Sort of compensation for the upheaval in their lives as well.

McDeath / Stainz: really, the simplest solution would just be DON’T DIE. I think that would make all of this worry moot. Think you can manage that? :wink: