Parents of minor children need to plan for the possibility they die before their children reach adulthood. Minors do not have the legal status or cognitive ability to make decisions about their care and finances so an adult must act for them. Two important concerns are who will care for and be the guardian of the children and who will manage the children’s assets. In most cases, the same person(s) can fill the role of guardian and money manager. By planning ahead parents can have input on the choice of a surrogate decision maker and how much control and oversight the surrogate has.
Parents may nominate a guardian for their children in their wills but only a judge can appoint a guardian. Trying to match the child’s future needs and the guardian’s abilities is challenging. As an alternative, parents may appoint a committee to determine the best choice for guardian if one becomes necessary.
Without prior planning, a court must appoint a conservator to manage assets for a minor. Since a conservator must report annually to the court and post a bond for the value of assets being managed, the child’s interests are well protected. However, conservatorships have ongoing administrative costs. Once the child turns eighteen however, the conservator must deliver the assets to the child. Most parents do not want their children to have control over an inheritance at that age.
Fortunately, with basic estate planning a conservatorship can be avoided. Parents can dictate who will manage the funds for the benefit of their children within their wills. This planning has options for the level of control the person has over the funds, either as custodian or trustee.
A custodian can hold money in an account until the child turns 25. This type of account is allowed under the Uniform Transfers to Minors Act (UTMA) and is often referred to as an UTMA account. This approach is more informal than a trust and gives the custodian more discretion on managing the money. A custodian is not required to provide annual accountings to the child unless requested. No third party oversees the custodian account so there is greater risk for abuse but the costs of administering a custodianship are much less than a conservatorship or trust.
Alternatively, a parent can establish a trust for the benefit of a child. An individual, a bank, or trust company can be named as trustee to manage the trust assets. The trust provides guidelines for how the assets will be used and when the trust terminates and remaining assets are given to the child. No court oversight is required but Oregon trust law provides checks and balances designed to avoid the possibility of abuse. Trust administration is usually less expensive than conservatorships because there are no court fees or bond premiums required.
An experienced estate planning attorney can help you understand which documents best fit your family’s needs. Contact the Estate Planning attorneys with the Law Offices of Nay & Friedenberg in Portland, Oregon at (503) 245-0894 to set an appointment.