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My wife and I have a new child and we're meeting with an attorney this week to draft a will. After doing some initial research, there are a few issues that make our situation a bit complicated:

  • We don't have any family members that we can trust to manage our estate
  • We want to be able to control, to some extent, how the assets are used

So, my questions are:

  1. Can we hire a professional to be the executor of our will? Perhaps our attorney?
  2. Can we hire someone to manage the estate while our child is still a minor?
  3. If we leave our entire estate to our 10-month old daughter, how can we control how the funds are distributed to her over time (e.g., $X must be used for college, $Y can be access in the event of a medical emergency, etc.)?
  • Isn't Q#3 referring to setting up a trust fund? – Chelonian Feb 27 '12 at 14:37
  • @Chelonian Yeah, I suppose that's what a trust is designed for. I guess the will specifies that the assets go into the trust and then the trust dictates the what/when portion? – Finch Feb 27 '12 at 15:17
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I am converting my comment on Jason R's answer to an answer and adding a few other points to consider. One reason for this is that his assertion that a trust can be set up for just a couple of hundred dollars leads me to believe that either he has no children for whom he needs to provide or that he and his spouse went in to the attorney with everything thoroughly thought out, and all questions answered.

With a spouse and minor child to take care of, you need to think of possible persons for three different roles. The same person could serve in all three capacities, but you have indicated in the comments that you prefer to have different persons in at least two of the three roles.

  • The executor of the will settles the estate of the deceased, filing the will in probate court, settling all debts and claims against the estate, distributing the assets to the beneficiaries, one of which beneficiaries might be an existing trust or one created by the will, and filing the estate tax return. Often, the spouse is named as the executor, and usually an attorney is hired to handle all the details and legalities by the executor. In other words, the executor does not have to be an attorney him/herself. This process takes anywhere from a few months to a year or more. Having an estate "open" for more than two years means that either matters are a huge mess, or there is lots of money and very complicated financial matters to settle. It is best to have at least one successor executor named in case the executor declines the job at a time when one is no longer in position to name another executor, and to guard against possibilities such as the spouse and oneself dying at the same time (e.g. car accident). The executor of the estate has no role to play once the assets of the estate are distributed and the estate settled. Indeed, one of the last acts is to file a motion in probate court saying that everything is taken care of as directed by the court, and requesting a discharge from the executorship.

  • If a trust is created by the will or has been in existence previously, it often has language saying that the income and assets are to support the spouse and minor children while the spouse is living, minor children thereafter, and specifies how the assets are to be settled upon the death of the spouse, or the children reaching adulthood etc. It is the trustee of this trust who will invest the assets, disburse the income (dividends and capital gains) at least once a year (the trust will have to file a tax return and pay tax at corporate rates on any income not distributed to the beneficiaries), and decide on how much of the assets should also be distributed annually. For what it is worth, the assets will be received by the beneficiaries as inheritance and no income tax is due while the income that is disbursed is taxable income to the beneficiaries.

  • A legal guardian of the minor child(ren) needs to be appointed if the other parent has passed on or dies at the same time. This is usually the person with whom the child(ren) will reside, and who should be given funds to support the child(ren), not just food and clothing but medical and dental bills (don't forget their health insurance!), school fees, summer camp fees, vacation trips, etc etc. As I mentioned in my comments, the trustee and the legal guardian may well squabble over how much money is needed for appropriate support. Also, keep in mind that probated wills are public documents that anyone can read, and if the trust is set up in the will, then the terms of the trust are also public. On the other hand, the terms of a revocable trust (as Jason R suggested you set up) are not open to the public.

Finally, be aware that a lot of your estate might well be passing to the beneficiaries outside of anything you say in your will. Specifically, insurance policies, IRAs, 401k plans and the like, will pay to the beneficiary that you have specified to them and you cannot change this in your will and direct them to pay the money into the trust instead, etc. On the other hand, there are other tax considerations that you should take into account in changing the beneficiaries on these accounts. So when drafting wills and trusts, be sure to take all these matters into consideration, and change beneficiaries on insurance policies, IRAs, 401k's etc only when you are fully sure what would be the best way to do things.

  • Nice, detailed answer. I agree that making these decisions can be more complex and time-consuming based on the dynamics of your situation; perhaps I gave it short shrift. – Jason R Feb 28 '12 at 3:52
  • @JasonR Thanks. IRAs and 401ks are particularly a problem because if the beneficiary is the estate or trust, then income taxes are due on the distribution, and since the value of the IRA and/or 401k is included in the estate, estate taxes may also be due if the value of the estate is large enough. – Dilip Sarwate Feb 28 '12 at 4:05
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In the US the short answer is Yes.

Most estate attorneys will establish and manage trusts for estates. My grandparents used the bank to manage the estate of the farm so that the farm would stay in the family.

The Attorney will act as an executor but it is not free. If the charges seem high to you get a few other options. There are even some firms that specialize in estate planning and management.

Reguardless, you will want to talk with an attorney to get the specifics for what you are seeking. The laws vary too much by area to get a comprehensive answer to your specific circumstances here.

3

As Chad pointed out, you can always hire someone to do the job for you, but I'd think long and hard about whether there is someone in your life that you could trust with the responsibility. Even if all of your family members are too irresponsible to handle the responsibility, you might have a close friend that could fit the bill. Another big conern with estate planning like this is who would care for your child(ren) in the event that you and your wife both pass away. If you identify someone who could take your kids, then that person might be a good candidate to handle the rest of your estate if they're willing. My personal philosophy is that if I can trust them to raise my children, I can trust them with whatever money I leave behind.

With respect to your last question, one way to do this is to set up a trust that receives your assets in the event that you and your wife both die. When setting up the trust, you can set up terms to how the assets subsequently get disbursed to the beneficiaries that you identify. You can earmark funds to be used by the trustee (the entity that you designate to be in charge of the trust, like an executor for your will) for specific purposes throughout your child's life, you can set dates at which they receive portions of the money, whatever you like. I'm not an expert on the various types of trusts, but my wife and I have a "joint revocable trust agreement" that provides these functions. Most of the language is boilerplate, so it's pretty easy for an attorney to put together; we paid a couple hundred dollars to a local attorney to set ours up.

  • Thanks so much! We have people in our lives that are loving and caring, and in that regard, will make good guardians. However, they're extremely irresponsible with money. That's our dilemma. It looks like we need a trusted person, like an attorney, to be both the executor and trustee. And I suppose we need to specify a backup in case that attorney passes away. – Finch Feb 27 '12 at 15:16
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    To add to Jason R's comment, the question of who will be the legal guardian of your child and raise your child in the event that both of you pass away is just as important as to who will be the executor of the estate or trustee of the trust fund. Be mindful of the possibility of conflicts between legal guardian and trustee ("I need $x to pay for expenses" vs "$x is way too much" or "The trust only authorizes $y per month" etc) in drafting the will and/or the trust. Be aware that revocable trusts become irrevocable when the maker dies, and the language becomes binding on the new trustee. – Dilip Sarwate Feb 27 '12 at 15:28
  • "My personal philosophy is that if I can trust them to raise my children, I can trust them with whatever money I leave behind." I'm sure there's some overlap, but the statement as stands doesn't sit well with me. You're suggesting the pool of good parents somehow has a higher than random mix of good money managers? It's one thing to trust their honesty, another to believe they'll invest prudently. – JoeTaxpayer Feb 27 '12 at 20:09
  • I'm not asserting that all good parents are going to be good investors. But, in choosing who would care for our children in the event of our passing, our opinion of their handling of money and spending habits is definitely a factor. So, that aspect of their lives plays into my decision to trust them with our kids also. If I question their money management, then I would be loath to trust their ability to care for my children in a stable environment indefinitely in my absence. This is just a personal philosophy, of course, not a hard-and-fast rule of thumb. – Jason R Feb 27 '12 at 23:34

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