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I have recently become the proud dad of twins -- a boy and a girl. (Does anyone want to see the photos?!) They follow the birth of my daughter Catherine three years ago, which prompted me to write the Fool's Guide to Investing for Children. Recently my wife and I have been thinking about what would happen if we were to both die suddenly.
Who would look after our children? They would be financially secure as we have life insurance that would pay out on our deaths, and I have a lifetime of working and investing now behind me, but what would actually happen to them? Where would they live? Who could we trust to bring them up in the way that we would want them to be brought up?
Clearly we are not the only parents to be struggling with this problem. The worst possible situation would be if we had made no financial provision for our children. But for us to die without having made a will, and for us not to have appointed a potential guardian would add more pain to what would be a very painful time for our children. The children would have to rely on the good will of our relatives and friends or even worse, on the State to look after for them.
You love your children, imagine what message you would send to them if you die and have made little or no provision for them? They are bound to grow up thinking that you could not have loved them enough to bother to make the necessary arrangements. So sit down and think about the financial consequences, and take out some life insurance to cover the short fall that would occur if you die.
But this article is not really about the financial future of your children. It is about something probably even more important. It is about how your children would be brought up if you were not around to have any influence.
What Is A Guardian?
Guardians are people who will look after your children while they are under eighteen years in the event of the death of both parents. You should appoint people that are acceptable to both parents, and who you can trust completely. Your children are the only 'asset' that you have which really matters -- you have to get this right!
How Do You Choose The Right Guardian?
The most important decision is who do you appoint to be the guardian of your children. The guardian will act as a 'replacement parent' and they will have to make all of the decisions that will have any impact on your child as they grow into an adult. Probably the most common people to be named guardians are your parents (the child's grandparents), or a brother or sister (the child's uncle or aunt), but the guardian does not have to be a close relative, or a relative at all. They can be a friend -- but they would have to be a very good and very close friend!
With many people now starting families later in life it may be that your own parents could be quite old, and so the burden of raising young children could be too much. Certainly our preferred choice of guardian would have been my parents, but like bLanark my parents are well into their 70's and this is not really a sensible option. You also may not feel comfortable with the lifestyles led by your brothers and sisters which means you would not want your children raised by them.
Today it is quite unusual for families to live close to each other, or even in the same country. In my own case we have no relatives living near us in Wiltshire, and one of my two brothers lives in the USA. Would we want our children to be brought up in the USA? Would it be even possible to do this? Would you want to uproot your children to move away from their friends and their school? As a result, many people have probably considered naming a non-family member as a guardian.
These would usually long time friends who know the children well. There is nothing wrong with doing this if you feel that it is in the best interest of your children. One thing to note -- it is often thought that by appointing a 'friend' as a god parent for the child you are appointing someone who would become their guardian in the event of your death. This is not true! You must explicitly state (preferably in a will) who it is that you want to become the legal guardian.
The selection of a guardian is crucial, and it is vital that you talk to them before you actually appoint them! It may seem obvious, but apparently many people put down someone (usually their parents) as a guardian in a will, but they fail to discuss or ask that person if they are happy to take on the task. We all hope that it will never happen. Indeed we are sure that we are not about to die anytime soon, and so it can seem strange to actually sit down with someone and discuss this. But it really is vital that you do it.
So before you name anyone as guardian, sit down and have a long talk with that person. Explain your request, the reasons why, hopefully (because you are Foolish) you will be able to reassure them that there will be plenty of money to help them care for your children, and where this money will come from. Make sure that they really do understand the enormous task that you may be asking them to take on, and give the potential guardian plenty of time to consider the consequences and the impact that this would have on their lives. If you have more than one child you can name a different guardian for each child. Of course, you will probably want your children raised together, but if you have a big family this may simply not be possible.
But naming the right guardian is just the first step. Once this has been done you want to try and make sure that your children are raised, as you would like them to be. Probably the best thing to do is sit down and write a letter to the guardian, outlining what your wishes are concerning things like education, religion, lifestyle, and so on.
What About The Children's Money?
Should the guardian also be the person who will look after your children's finances? Firstly it is important that you leave behind more than enough money to look after your children. You can imagine there would be nothing worse that having to care for someone else's children and see that your own have to suffer because you cannot afford to educate them properly or to take them away on holidays because you now don't have enough money. This would be a potential source of resentment from the guardian and also possibly the guardians' own children. It may be that in order for the guardian to take on and look after your children properly they will have to move home, or build an extension, and the cost for this should rightly come out of your estate, but this has the potential to cause major conflicts.
It may well be a good idea to name someone as a co-trustee with the guardian to help manage the children's money, who would have to be involved with any decisions concerning how money belonging to your children was spent. But you can imagine that this has the potential for conflict to be built into it. I would suggest that if you think a person is suitable and trustworthy enough to look after your child or children, hopefully they are suitable and trustworthy enough to also look after your children's money!
It may be that the guardian is not Foolish with money, in which case it is probably incumbent on you to try and teach them the tenants of Foolishness. This will definitely be 'good for them' whether they eventually do become a guardian or not!
Is It Legally Binding?
Your written wishes do not make the appointment of your chosen guardian a certainty. After your death, a court will decide whether the person you have named is fit to serve as a guardian. This is usually granted automatically, but there is always the chance that the court may find your selected guardian unfit -- for instance if they have a history of child abuse, or an active alcohol or drug addiction, in which case the court may decide to appoint another guardian.
Of course, you love your children, and so hopefully you will have selected someone who has similar values as you do, and who really would be the most suitable person to bring up your children, in which case the courts are unlikely to intervene. Occasionally, other family members may challenge your choice of guardian, but they must have a very strong case for doing so, otherwise your choice will usually prevail.
Conclusion
If you die, your children will miss you and think of you every day for the rest of their lives. Proper planning for them now, in case the worst happens, may make or break their future happiness. You love them too much to take that chance.
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