Do you have a pressing financial question on which you could use a bit of expert help? Email firstname.lastname@example.org. Today’s expert is Priya Malani, cofounder of StashWealth, a financial planning firm for H.E.N.R.Y.s (High Earners Not Rich Yet).
“My husband and I are in a comfortable place financially, and in drawing up our will, we'd like to make his sister the legal guardian of our kids. The only hitch: She's terrible with money. Is that a problem? What steps should we take to make sure she'll be fiscally responsible with our cash as it relates to our children?”
First things first: It’s important to remember that the odds of your young kids surviving both you and your partner are so, so slim. (Not a guarantee, of course, but something to help alleviate some of the pressure and stress around this emotional topic.) If one of you should pass away before your children, the care for your kids automatically falls on the surviving parent, unless you name a guardian.
Still, for this situation—should the worst-case scenario occur—you can actually use your will to assign different responsibilities to different people as they relate to care and finances.
This means that if your sister is the one who, ultimately, you both believe will deliver the best (and most nurturing) care, you can go with her as the legal guardian in the event of your death. But you can simultaneously set up a trust and name a trustee—who isn’t the guardian—who will be directly in charge of all financial matters pertaining to your kids.
To set up a trust, you would work with your estate planner. This account is tied to a document that spells out everything about the funds being held in it—what they are, how they are to be used, timelines, etc.
If you do decide to go this route, it’s smart to speak to both individuals you have appointed before putting it in writing. You should have reasons and a rationale for your strategy (for example, “we feel the most comfortable having the two of you tag-team”) so that everyone is on the same page and there are no issues down the line. If you don’t, the person in charge of care might feel slighted, so having a conversation here is key.
If you don’t create a trust, the legal guardian will control the money until your child reaches age of majority, which is 18 or 21 depending on state law.