Case Study: Choosing Guardians and Trustees for Children - Madge and Chad's Story

Madge and Chad are married with two children, Emily (four years old) and Rose (two years old). They do not have formal wills, but their friends Blake and Kate have agreed to “take care” of the girls in the unlikely event that both Madge and Chad die in an accident.

Although they enjoy Blake and Kate’s friendship, their lifestyles and interests are not totally compatible. Blake and Kate are big spenders, unlike the more frugal Chad and Madge. So they put off getting their wills done because they can’t decide whether to appoint Blake and Kate or ask someone else.

Question

Who should Chad and Madge appoint as legal guardians in charge of the day-to-day welfare of the girls, and whom should they put in charge of managing the money they’d leave for their children's upkeep and education?

Guardian vs. Trustee

  • The guardian’s role is to be legally responsible for the upkeep of the children until they become adults. The guardian can personally raise the children or oversee someone else doing so.
  • A professional trustee, a respected family member or a friend may be appointed to manage money held in trust for the children and make payments that cover the financial demands of raising children (food, shelter, care and education costs and reimburse the adults responsible for raising the children, for acceptable out-of-pocket costs).

Choose a guardian who:

  • Is capable of making sound decisions regarding where, how and with whom the children will be raised.
  • Has personal and cultural beliefs acceptable to the parents.
  • Is prepared to oversee the personal and educational development of the children.

Choose a trustee who:

  • Is knowledgeable and capable of managing money.
  • You trust to act as a legal and ethical “fiduciary”; who will prudently take care of the money held in trust for the children.
  • Can maintain a cordial relationship with the guardian while making payments from the trust in the best interests of the children.

The Next Steps

Madge and Chad should:

  • Analyze the pros and cons of having Kate and Blake act as guardians.
  • Consider if a conversation with the couple to address their concerns would be helpful. Open communication is essential to make the best decision for the children and to maintain their friendship, regardless of whom they choose as guardians.
  • Evaluate whom they could name as the trustee. Investigate whether the services of a professional trustee are worth the fees they charge. Lack of family members nearby or large amounts of money to be managed in the trust (which may include life insurance payouts) are two reasons people use professional trustees.
  • Ask permission of their preferred guardians and trustees.
  • Discuss and agree on financial compensation for fulfilling their roles. Ensure compensation is addressed in the will.
  • Once the guardians and trustees are in place, move forward. There are more decisions still to make, including appointing their executors, attorneys and agents.
  • Consult with an estate-planning lawyer for assistance with their:
    • Wills
    • Enduring powers of attorney for property
    • Personal health care directives