Guardianship of the Estate
A guardianship is necessary when the person who will inherit is a minor i.e. he or she is under age 18. Minors do not have the legal ability to contract, and therefore cannot own their own assets, although a minor may be a beneficiary.
A very common example of how a Guardianship of the Estate occurs is that the parents of a minor child decease leaving their estate to the minor. Since the minor cannot be the legal owner of the assets, a Guardianship of the Estate is created whereby someone (usually a family member) is appointed by the Court to manage the minor’s assets. This is a timely and costly procedure since the establishment of the Guardianship involves court proceedings, and then the court, in an effort to make sure that the Guardian is using the assets for the minor’s benefit, and not the Guardian’s, requires there to be regularly filed accountings. Again, this is very time consuming and costly.
With a Living Trust, a Guardianship of the Estate is avoided since the Living Trust holds the assets which are managed by whomever you select to manage your assets after your death. The typical scenario is: (1) the Living Trust is set up; (2) the parents decease leaving minor children; (3) the Living Trust names a relative or close friend as successor trustee to manage the trust assets for the benefit of the minor children; and (4) the successor trustee provides for the minor’s health, education, maintenance and general welfare until such time that you have set forth in your Living Trust for distribution.
Often parents provide in their Living Trust that the successor trustee (who remember is chosen by you to act after your death) can manage the trust assets for the health, education, maintenance and general welfare of the children until they are age 25 at which time they are to receive one-half of their share, and then at age 30 when they are to receive the balance of their share. This does not mean that the children cannot receive any of the assets until they are 25 or 30, but rather, that the distribution of the assets prior to these ages, or whichever other age you decide upon, is in the discretion of the successor trustees. If the successor trustee deems it appropriate to spend up to the whole of the trust allocated to the minor, then they may do so; however, the Living Trust is typically designed to prevent the minor from demanding their entire inheritance until the age you specify.
Without a Living Trust, when the minor attains age 18, the Guardianship of the Estate terminates and the new adult (18 year old) is entitled to their entire inheritance free of any restrictions whatsoever, and the fact is that most of us at age 18 are just not mature enough to handle the kind of money that tends to come with inheritances.
THE PROPERLY DRAFTED LIVING TRUST WILL AVOID A GUARDIANSHIP OF THE ESTATE AND ALLOW FOR DISTRIBUTIONS TO OCCUR BEYOND AGE 18
Guardianship of the person
A Guardianship of the Person occurs where the minor’s parents have deceased and the court appoints an adult physically responsible for the minor. The Guardian of the Person need not be the same person as the Guardian of the Estate i.e. you may name one person to be responsible for the actual raising of your minor children while naming another person to be responsible for the money. Remember, though, with a Living Trust, you will not need a Guardianship of the Estate because your assets will be owned by your Living Trust, and managed by your successor trustee after your death. Thus, with a Living Trust, you will not need a Guardian of the Estate; however, you will need a Guardian of the Person to raise each of your minor children.
THE LIVING TRUST DOES NOT ADDRESS A GUARDIANSHIP OF THE PERSON AND THUS A NOMINATION OF GUARDIANSHIP OF THE PERSON IS NEEDED.